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Where Are We Going?

March 9, 2009 – 12:02 pm

Before the opening this morning there was a major merger deal between two prominent drug companies while at the same time Warren Buffet stated that our economy fell off a cliff over the last six months.   

Pre opening the market was down but started to improve immediately. On everyone’s mind is how low it will go before the long awaited rally shows up. The consensus seems to be that it could go as low as 5,000 for the Dow and 500 on the S&P 500 but most experts are between 5,500 and 6,500 for the DOW and like moves in the S&P 500. As the Dow sits at 6,625 this morning that does not seem too far to go. The problem with experts is that they are often wrong. The market could stop its slide today or go further than anyone expects. What is certain is that few people are reacting rationally to prices of individual stocks. There are extreme bargains but until buyers decide to move back in those bargains will remain. 

In a weekend article in Barron’s there was a statistic that struck me as significant. There is $4 trillion in mutual fund money market funds while the over all value of the stock market is $8 trillion. Remember, that $4 trillion is in mutual fund money market funds ready to be put back into stocks. How much more money is sitting in other money market funds? 

The market will rally. It’s when, not if, and from what level. Those are two very tough questions. 

Good Trading,

Steve Peasley






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