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The Stock Market: Where we have been and where we are now

Market Commentary from J. Peter Lynch

Point Roberts, South Salem, New York - April 14, 2010 - Investorideas.com and its green investor portal, renewableenergystocks.com, update investors with recent market commentary from contributor, J. Peter Lynch.

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Every step of the way since April of 2009 we have heard the popular financial press and the frenetic cable pundits tell us a litany of things to worry about - foreclosures, unemployment, the growing deficit etc. and all along this troubled path the market has steadily moved up, climbing this classic "wall of worry" with the major averages advancing significantly from the March 2009 lows S&P 500 +77%, Dow Jones +68% and Nasdaq + 94%.

These are VERY strong numbers, by any historical measure and the logical conclusion to draw is that the market must be close to a top. I certainly understand that, in fact, actually "feel" that is the case. But what is important to understand is NOT your emotions, but WHAT IS.

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At this time the market is performing in a very orderly manner and the underlying technical measurements are sound and are still pointing to a higher market with the major uptrend still intact, despite all of the worries and other concerns. It is true that the market is at a HIGHER level of risk, but it has done this before back in late 2003 the market stayed at a comparable high level of risk for extended periods of time climbing another classic "wall of worry".

At this time, some additional relevant historical data is worth considering. Since the beginning of this new bull market (March 2009) the stock market has had 2 meaningful corrections of LESS THAN 10% (June July 2009 and January-February 2010) and NO CORRECTIONS more than 10%, this situation, historically is a healthy one for an unfolding stock market. A market that goes "straight" up with no corrections is a dangerous situation NOT a healthy situation.

As I said, the market has NOT had a correction of 10% or greater since March of 2009. Why is that significant? It is significant because there has NEVER been a bull market in history that has NOT had at least one 10% correction BEFORE it topped out (Credit: Invest Tech Research). As a result, it is likely that we will have at least one 10% correction and then another move upward before the end of this bull market.

Where we are now? Somewhere in Stage 2!

I always think that a picture can tell a better story than hundreds of words, so take a look at the diagram below. This is a snap shot of the classic stock market pattern, how it "usually" unfolds and where I think we are now on the curve.

These stages are the four classic stages of a typical market cycle that generally moves from FEAR to GREED and back.

Stage 1 "Capitulation". This was late 2008 and early 2009. The world as we know it is ending and all was lost. If you go back and look at the "headline hysteria" back then this would not seem far from the truth.

Stage 2 "Doubt and Skepticism". This is the period we are in currently, climbing a wall of worry. The market has been moving up for over a year and STILL most people do not believe that this can be real. This psychological fact is reflected in the various measures of investor sentiment that are currently nowhere near the levels that are historically seen at market tops. It is a scary time, but the main trend is still intact.

Stage 3 "Euphoria". Here is where the "greed" factor and fear of being left behind starts to come into play and usually after one last correction the market takes off on its last "glorious" run up, taking the general public with it. This always ends the same way. After this last run up there are no more buyers and only sellers.

Stage 4 "Hope followed by Fear". As the market begins to roll over and start down the "slopes of hope" investors keeping hoping that it will come back. Despite the clearly deteriorating underlying technical factors etc. etc. people just do not want to believe (i.e. emotional decision) that it is happening and that "this time it will be different". But alias, that is very seldom if ever true and the hope gives way to fear and finally to capitulation.

PS - Do not lose heart. I have been an investor for over 35 years and I know ALL of the above perfectly. But that does NOT mean that I do what I say and what know from experience. It is a constant battle the best you can do is be aware of it, learn from it and try to develop an unemotional method to deal with it.

Mr. Lynch has worked, for 33 years as a Wall Street security analyst, an independent security analyst and private investor in small emerging technology companies. He has been actively involved in following developments in the renewable energy sector since 1977 and is regarded as an expert in this field. He was the contributing editor for 17 years to the Photovoltaic Insider Report, an early publication in PV that was directed at industrial subscribers, such as major energy companies, utilities and governments around the world. He is currently a private investor and has from time to time been a financial/technology consultant to a number of companies. He can be reached via e-mail at: solarjpl@aol.com. Please visit his website for the promotion of solar energy - www.sunseries.net.

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About InvestorIdeas.com: Investorideas.com creates a meeting place for investing ideas to take form and come to life in an entrepreneurial environment, servicing the needs of small investors and start- up companies to large conglomerates! We cover multiple industry sectors but specialize in environmental and water.

Disclaimer: The views and opinions expressed in the research published are those of the individual companies and writers and not necessarily those of Investorideas.com® or any of the industry sector portals. At the time of publication, writers may hold positions in the stocks or companies mentioned.
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Disclaimer: Our sites do not make recommendations. Nothing on our sites should be construed as an offer or solicitation to buy or sell products or securities. We attempt to research thoroughly, but we offer no guarantees as to the accuracy of information presented. All Information relating to featured companies is sourced from public documents and/ or the company and is not the opinion of our web sites. This site is currently compensated by featured companies, news submissions and online advertising. www.InvestorIdeas.com/About/Disclaimer.asp

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