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Hope for a Pullback

August 21, 2012 – 5:02 pm

Earnings season is over, we have the fiscal cliff still looming the election ahead of us, and Europe is still struggling with deepening recession while China continues to look for more growth. So why are U.S. stocks reaching a new four year high this morning for the S&P500?

Investors and traders see better times ahead, not worse. This rise from the sharp pullback in May that was as deep as 10% had been one described as, ‘a crawl up a wall of worry’, a term coined by someone that is smarter than I am. This wall of worry is actually a healthy bull market phenomena. Also healthy in bull markets are corrections and 10% is common. For this bull market to continue for a longer period there will have to be a pullback.

Of course there does not ‘have’ to be a pullback, but that would indicate an unhealthy rally which is very susceptible to crashes. A crash would give back all the gains for this year.

Hope for a pullback, that would restore the market to a better outlook for further gains for the year end and into next year. There certainly is enough to worry about to cause a pullback, just don’t fear it.

Good Trading
Steve Peasley

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