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Market Commentary: Support Holds

February 4, 2009 – 12:18 pm

The market has decided it wants to hold support at 8,000 on the DOW and 800 on the S&P 500. This area is what technicians call support because in January prices fell to these levels and broke up which was a test of the December and January lows. The longer this mark in the indexes holds, the more convinced the market is that we have seen the lows of this market.

Reading charts is not a science, it is more an art. The support area the traders see is a result of their own actions. When they see the indexes reaching these areas they decide to start buying and this makes their prognostications come true.

The question these same traders ask themselves isĀ ‘Is this the worst we are going to see in the economy?‘. Have we, the investors and traders, sold off stock prices enough to reflect the depth of the recession we are facing? The support area on the indexes so far are saying yes.

Make no mistake. That could change with any surprise we might see like the one that happened with the worlds banks in October. However, with the governments of the world trying to reinflate and watching as well as supporting banks, that particular problem will not be where the surprise could come. That is the nature of surprises; no one knows where they might come from.

Good Trading

Steve Peasley

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