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Market Corrections

February 22, 2011 – 6:20 pm

The question on investors’ minds this morning, after the world turmoil hit the news, is will this cause the market correction we have been waiting for? One day does not mean much in terms of a normal correction unless the fall is much deeper than the 100 points it gave back at the start of the day.

Frankly, there was no news that should affect in any significant way the growth of our economy or profits for our companies. The news out of Libya is affecting oil prices but that will likely be a short term problem. The Middle East is in political flux but once it is all said and done I doubt there will be much change.

Meanwhile gold has risen for a few weeks in a row as fear escalates. Gold moves up on world conflicts and inflation. The fear of these things is what drives gold prices. The falling dollar has added to this rise. How high it will go is a guess.

A market correction is a health restoring event as the march up in stock prices has been strong over a long period of time; too strong and too long. With a correction those weaker hands holding stocks will take profits as they fear loss and that sets up a situation for those who did not participate to jump in. After the correction those same weak hands will also move back in. Corrections are a good thing just as long as they do not turn into something deeper.

Good Trading
Steve Peasley

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