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Market Commentary: Close But Not Yet

September 11, 2008 – 11:12 am

 

  Volatility has caused queasy stomachs for both professional traders and individuals. There is little economic news so everyone has refocused on the financial crisis and what the government takeover of Freddie and Fannie means. In the short term it has meant that 30 year mortgage rates have fallen from 6.25% last week to 5.79% this week. That alone is a very good thing as the affordability index for a home has now fallen sharply. If rates stay low expect a spike up in the months ahead for home sales. I didn’t say prices just sales.

We are seeing lower gas and food prices, lower interest rates for mortgages and a Fed that is very accommodating with money supply. This is a recipe for a bull rally but don’t expected it before the presidential election. The one big issue that is not over is the problems with banks. How much more in write offs do they have to account for? No one really knows and it is that unknown that is holding the market back.

The economy will remain weak but stock markets rally long before the economy shows strength. Don’t just rely on the economic numbers. If you do, you will be doomed to be a follower not a leader in the market and thus lag in performance.

Good Trading
Steve Peasley 

 

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