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Market Correction

May 14, 2010 – 4:53 pm

This morning several economic reports were released. Retail sales for April rose .4% while the experts thought it would rise only half that amount. U.S. Manufacturing also rose 1% for April and it was broad based showing strength throughout the economy not just in airlines or auto. In fact auto sales actually fell, so without it manufacturing was 1.2%. Other stats out this morning confirm a strengthening economy, not weakening.

These numbers didn’t seem to make much of an impact on the stock market this morning as we are in a corrective phase. For the week the market is up but as I write this, Friday’s morning trading has just started. The DOW would have to fall about 300 points to produce a negative week.

The strength in the dollar and weakness of the Euro has been the catalyst for the weakening stock market here in the U.S. which is odd. Normally a strong dollar is looked upon as favorable but in today’s international economy it is not the good news it used to be. Also, gold usually falls when the dollar strengthens and that pattern has also been broken, at least so far.

It comes down to FEAR. No one really believes in the economic numbers showing a recovery. You can see fear in the higher gold prices and the massive move of money into U.S. treasury bills as investors leave the Euro and higher risk stocks, buying our debt despite the fall in yields.

The correction is in full swing. They usually last 4 to 6 weeks and if we are looking at a normal correction we are a little less than half way through.

Good Trading
Steve Peasley

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