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What’s Next?

June 29, 2011 – 5:02 pm

The Greeks passed the first vote adopting the EU and IMF imposed austerity package and tomorrow they will vote to implement it. However, it is occluded for the time being. Another disaster averted or at least kicked down the road to some other disaster date.

There is always a crisis of some kind as the market turns away from the Greek issue and towards the ending of QE2 on the 30th and then the debt ceiling debate in Washington. We saw an uptick in interest rates over the last couple days which was a probable reaction in advance of the QE2 expiration. QE2 was the Feds effort to keep interest rates low by buying U.S. treasury debt. The more buyers of our debt the more downward pressure on the bond rate paid. This keeps borrowing costs down. When that extra buyer of debt disappears costs go up. Interest rates will likely keep rising.

The market is in relief mode as we have had two days in a row with triple digit increases in the DOW. We are also coming to the end of the ‘earnings warning season’ and the actual earnings season which starts in a couple weeks. We have had very few companies warning us that they are not gong to make their earnings numbers. That usually
means earnings are going to be good. I especially like that the analysts have reduced expectations for earnings and year end growth. With lower expectations it is easier to surprise on the upside.

The analysts were wrong on the first half growth of the economy being far too optimistic, now I am hoping they will wrong the other way for the second half. One thing is certain the experts are always wrong.

Good Trading,

Steve Peasley

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