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Soft Patch

May 20, 2011 – 5:06 pm

The stock market is weak again at the opening this morning while at the same time oil fell to $96 per barrel. Just a few weeks ago the news was hammering us that oil and commodity price inflation were going to send
us into an economic swoon and now with all commodities falling there is little talk of a new recession caused by inflation. In fact inflation has left the front pages everywhere except in Asia. They are still fighting that battle, but maybe not for very much longer.

Oil is the most important issue as world demand is still rising albeit slowly, and every American has to drive. Consumption in America is actually down year over year but high oil prices acts like a tax on everyone. With that tax falling that puts money back into everyone’s pocket so that it can be spent on something else.

Consumers are all important. We have hit a soft patch in our economy some of it due to weather, some due to the Japanese earthquake but most of it due to higher energy prices. That trend is moderating and in fact reversing, at least temporarily.

This economic soft patch is causing stock market softness though it is not much. You need to buy this summer’s pullbacks. The economy is still growing slowly but corporate earnings are on a tear. This soft patch will pass.

Good Trading
Steve Peasley

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