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Encouraging, but Cautiuos December 2, 2011

Posted by Tom in Thoughts.
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I’ve posted my newsletter for December under the “Newsletter” tab, so I won’t repeat it here.  But, I will duplicate one chart:

When I drafted the newsletter a few days ago, I said that the 1260 level (resistance) was an area to watch.  Today, 12-2-11, the S&P 500 index went right up to 1260 (green circle above), then retreated.  Is that significant?  We’ll have to wait until next week to see.  Many investors have been watching the 1260 level, and may have been “spooked” by it.  Especially going into the weekend, when bad news is typically released.

The big move on Wednesday of this week was caused by the US Fed, ECB (European Central Bank), national banks for the UK, Japan, China and the Swiss all lower their interbank loan rates to near zero.  Since money is the raw material of a bank, can you image any company being given raw material for nearly free?  That’s one way to avoid failure.  These rates will be in effect from 12-5-11 through 2-1-12; long enough to hopefully get a coordinated plan together for the EU.

The real question is how long will this market move last?  With good news coming out of Europe, strong corporate profits and a slowly improving economy, it should generally improve.  But one false step, and we could easily revert back down.  We’ll watch stock index prices and their volumes for signs of strength.  Next week should be interesting to see if we can break and then hold above the 1260 level.

For now, be cautious and ready.  Have a good week.         …..  Tom  ……

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