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Where From Here?

May 17, 2010 – 4:59 pm

This morning the market is trading sideways as it digests some positive earning news and a buy out of OSI Pharma. This week is going to be light on economic news but there will be two reports that will be important. April housing starts will be reported tomorrow and April’s leading economic indicators will be released by week’s end. There will be inflation reports but everyone already knows that inflation is not a problem at this point. When everyone knows something there is no reaction to it. Housing is still an unknown and the Leading Economic Indicator is a forward looking report so those two are going to be much more interesting to investors.

The economic news is and has been good for some time as we dig our way out of the recession. Earnings for corporations are very healthy and their cash levels are at or near all time highs. These are two basic fundamental reasons that this current weakness in the stock prices should be only a correction, not a return to the bear market.

Fear is still very high, thanks to the European situation. However, fear is not necessarily a bad thing for the stock market, but rather an argument that the weak holders of stocks are already out. Still, fear is hard to gauge. Is there enough fear built into stock prices? If so the correction is over. If not we still have more weakness to come.

Good Trading
Steve Peasley

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