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Leading Economic Indicators

April 19, 2010 – 9:41 am

Despite the Goldman Sachs bombshell that the SEC set off on Friday, accusing the company of fraud on an issuance of a toxic CDO (Collateral Debt Obligations), the stock market found its footing this morning. I think a lot of the better mood this morning is due to the stronger than expected leading economic indicator for March. It was up 1.4% and February’s number was revised higher.

There seems to be a change, small though it may be, in the expectations of the direction of our economy. More experts and stock market pundits are starting to talk about a stronger than expected recovery. It is not ‘all’ experts and I am not sure I believe it, but just because there is a change in outlook by some of these economists it changes the physiology ever so slightly. There will be some investors that will speculate that it could happen.

Have no doubt most experts still feel it is going to be a slow painful recovery and I agree, but stocks in the short term move by changes of fear and greed and long term they move on earnings. Long term earnings are going up and in the short term any change in perception is important to understand.

It is always difficult to react to the short term gyrations of the market and its fickle emotionally driven stock price changes. It is much more fruitful to understand the underlying trend and that appears to be up, not down. Of course it never hurts to take profits but look for a place to reinvest and any short term correction is a good time to put money back to work.

Good Trading
Steve Peasley

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