Well, July as I said is typically a bad month for the general market. Drugs/biotech always do good in July after the initial drop early on as today proved yet again.
If the SPX breaks 875 or even a bit higher, then it's most likely going to the low 800s on that H&S break. I told you all that end of quarter proping up usually is what sets up July as a bad month as these manager a-holes don't sell off stocks into quarter end for the window dressing of statements. That way you don't get freaked out when you get your statement and want your money out. So, they hold off selling until just after June and then bail.
Because the volume has been so pathetic over the last few months, it makes sense the market would fall pretty strongly after q-end because it's only these clowns who are buying stocks, not the public. We are only but a few traders out there left. So, the crowd had a small door to squeeze out of all at the same time. Most large funds have no interest in the market at these levels as you can make a very good case as to the market being now extremely overvalued if the SPX earnings end up coming in around $43ish. That potentially values the market under 600 on the SPX. The reason it would trade north of that (at these current levels) is becuase of the hope that things will be getting better soon.
Normal recessions last less than two years and actually less than 12 months. This time is truly different. Then you add in these fools in congress talking cap and trade which will require upwards of double your utility bills to cover the upgrade costs to the coal power plants which make up 80% of all power plants in the country to meet these potential new requirements, and now even talk of a VAT here like they have in Briton, wow. Who the hell knows what's going to happen.
There has never been a civilization in history that has taxed its way to prosperity. Never. And yet the 'change we can believe in' crowd that runs things now is wholly convinced it will work in the worst time to practice it. Just unbelievable. The one good thing about this crisis is that its forcing my stupid state (California) to basically put the unions out of work until they agree to take less for the simple fact that we don't have the money to pay them anymore regardless of their election threats to the Dems they elected. You gotta see this ad that's been running showing the woman SEIU rep literally verbally threatening the Dem legislature on camera that they are going to go after each of them at election time if they cut their contracts. It's really fun to watch.
It's really starting to look bad for the Dems in 2010. This could be another setup for another 1994 rout again. Personally, I'm a registered independant having been disgusted by Bush, but that didn't mean I believe in this garbage. If reality starts to set in, the market could really be headed for a monster fall. I really do feel like the market's rise has been mostly propped up in an attempt to create 'happy feelings' in the overall economy to prevent disaster. I agree the premise to an extent, if that's what has been going on, but only to a limit. If you ever read the history of JP Morgan and what he did to save the stock market back then, it's the same idea now. But again, you can only meddle so much before you create more problems than you solve.
I get the eery feeling we're on the verge of that reality check.
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