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Patterns

November 14, 2011 – 6:03 pm

Over the last couple weeks it seems like we are in a small back and filling process for the market. It is a normal process after a large rise in stock prices from the summer lows. This back and filling, or consolidation, should end soon and the market will likely continue to rise without any unforeseen world events. This process has nothing to do with the reality of what is happening in the economic or political world. It is purely observational recognition of what usually happens.

Consider the economic factors; in the U.S. growth is continuing but at a slow pace which appears to have some sustainability despite Europe’s possible fall into another recession. China looks a little stronger which helps to offset Europe’s weakness. Inflation is under control and beginning to weaken in Asia, an issue that has had them worried for some time.

Politically, in the U.S. we have the super committee meeting that is supposed to find ways to reduce our debt. If they don’t, automatic cuts in spending kick in. This debt debate is not nearly as critical as the debt ceiling crisis a couple months ago. That event threatened to shut the government down whereas this super committee issue will not. It is important and will affect the market but not nearly as much as we saw in the summer.

There is always something to worry about but I think it is more prudent to rely on the market pattern this time as corporate earnings are still rising and stock prices are low. That and the time of the year means it is more prudent to be in the market than out.

Good Trading
Steve Peasley

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