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Market Commentary: Rally or No Rally?

December 22, 2008 – 1:35 pm

As we enter Christmas week and then New Years, traders will be looking for the traditional end of the year rally. Both selling and buying that takes place during this time. Tax loss selling may be pronounced as there have been plenty of losses and traders may want to lock in those losses to apply to future gains. Buying may come in to try and take advantage of very inexpensive stock prices in an effort to benefit from a recovery to normal values of those stocks going into the new year.  

What might drive the market this week is the new and existing housing report for November which will be out Tuesday. Will inventory stabilize or sales increase? Everyone expects foreclosures to increase and prices to be weak but with the recent reduction of interest rates, which won’t help the November report, investors are paying closer attention to the home sector of our economy.  

At some point in 2009 cash, earning next to nothing in money market and short term treasuries, will not be desirable. That cash will find other places to go and some of the trillions of dollars that are avoiding the stock market will return. When that happens we will have a sustained rally. Until then the market is going to be choppy.

Good Trading
Steve Peasley 

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