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Normal and Abnormal

November 17, 2010 – 6:04 pm

With the market in correction mode for the last week and a half every news outlet is looking for the reason when in fact the fall is a normal event after two months of strong stock market returns. It is unlikely to last as the economic statistics and the few earnings still being reported are pointing to an improving economy and continued strong earnings growth.

This week the fear was over South Korea raising their interest rates and speculation that China would follow suit in an effort to slow their inflation rate by trying to slow their very strong economies. Also, the European worry flared again. This time it was about Ireland. At some point no one will worry about the weak countries in Europe. When something keeps crying wolf as has been happening in Europe over certain countries’ financials the cry is going to start being ignored. I think we are getting very close to that situation.

These are nice issues to blame the correction on but why not just say that the market was over bought and needed a breather and leave it at that.

This week on the economy we had reports showing no inflation at the wholesale or retail level and a housing market that is still very weak with slight improvement in building permits as we look forward.

The correction will not last. It will run its course maybe into next week but it is hard to see it lasting longer than that unless something unusual happens.

Good Trading
Steve Peasley

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