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Perception and Reality

June 2, 2010 – 4:42 pm

There is a battle between the bulls and the bears going on at the level called the 200 day moving average for the major stock market indexes. This level has been historically a support or resistance area when it comes to pricing. What that means for average investors is that the experts who watch these levels do and will react to them thus pushing stocks back up or pulling them down at more than normal amounts as prices penetrate the 200 day moving average.

This battle has nothing to do with earnings, employment or the merits of the economy. It is all about perception and emotion. When it comes to the stock market the short term is always about perception and emotion but over time stocks go up and down based on earnings.

Earnings are very strong, emotion is stronger, the rational investor controls emotion and focuses on earnings. This is a very difficult task and one every money manager struggles with not only for himself but also in interaction with his clients.

The stock market is at bargain prices and as the prices fall in this current correction it only means stocks are on sale even more. The courage to buy and stay the course is difficult. The problem is that emotion can not only make stocks fall it can also turn an economy on its head and thus justify the fall, a case of perception becoming reality simple because it is perceived..

Good Trading,

Steve Peasley

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