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Understanding Market Movement

March 14, 2011 – 5:45 pm

The economic statistics over the last couple weeks is demonstrating that our economy is gaining strength not weakening. At the same time the stock market is in the midst of a mild correction. At least mild in terms of the depth of the pullback in the indexes. Many novices do not understand how the news and fundamentals of the economy and corporations can be improving but stock prices falling. They also fail to understand why when in the depths of despair when those same economic factors look at their worst, that the stock market rises.

It is very simple if you understand that the stock market and its movement as a whole is the best leading economic indicator. Investors and speculators individually and as a group are students of economics. Their job is to anticipate and they react by buying and selling long before the numbers support their decisions. The truth is they, as a group, have been very good at predicting economic turns both up and down. In fact their buying influences economics so in a small way they also add their weight to a recovery or a recession.

Understanding the interrelated aspects of the unlimited factors in buying and selling stocks is almost impossible but it is easy to learn that stock prices always lead the economy up or down. That is why one of the oldest sayings is true, “The Trend is Your Friend”.

Good Trading
Steve Peasley

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