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Market Commentary

A comment from James Welsh, founder of Welsh Money Management LLC., that has one of the most concise and logical arguments I have seen about the market:

Last month I expected the S&P to pull back to 980-1,000, before rallying to 1044. The S&P dipped to 992 on September 2, and then rallied to 1,047 on September 11. It is noteworthy that the S&P pushed above 1,044, after Bernanke’s comment that the recession was likely over on September 15. Institutional money managers do not like holding cash, even during large declines. With the quarter’s end just days away, most institutions will not want to increase cash holdings. This suggests the market will likely hold up until September 30. As noted earlier, the market’s internals have been healthy, which is another short term plus. However, the market has come a long way, and investors are going to be a bit more demanding than they were in July. Oracle’s revenue shortfall and subsequent sell off may be a hint of things to come. The S&P could push up to 1,095 going into early October. If revenue shortfalls prove disappointing, the S&P could drop to 990-1,015 by the end of October, or early November. Selling a little over the next two weeks is a good idea. The market is likely to make higher highs after this correction.

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