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It’s Back – Volatility

February 12, 2010 – 5:18 pm

This has been a week of volatility for stock prices, though long term a 1% to 2% move on a daily basis is normal. With the DOW at 10,000 that means 100 to 200 points per day. We are still in the correction phase of the bull market which started last March. So far the correction has been about 7%.

The concern this morning seems to be over China and its announcement that they are going to tighten money supply again in an attempt to slow down their growth and thus inflation. Their most recent growth was said to be 10.1% for the final quarter of 2009.

In the U.S. retail sales for January were up a higher than expected .5% and November and December’s numbers were revised up. This is good news but we have to remember that this increase is from a low base. In real dollars that are being spent it is not that strong. Of course with a 10% unemployment rate you can’t expect retail sales to take off.

It appears the market is conflicted this week. We have had some good sized up days and down days and the DOW is trying to hold the 10,000 mark. There is no change on the economic outlook as we slowly dig our way out of the recession. Earnings for corporations are surging. These factors tell me this is a correction and not a return to the Bear market.

Good Trading
Steve Peasley

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