Sick Market

Posted by Jeff Carter
on June 30th, 2010

Why the heck is the market puking? That’s what people are asking themselves today. The market tried to rally today, but in the last hour everyone puked.

I have a few reasons why. One, uncertainty. On The Closing Range radio program today Jack Boudroujian was talking about valuing the market. No one out there seriously knows how to actually value it today. Sam Zell on CNBC’s Squawk Box a couple of days ago said (paraphrased) “If everyone was certain about what was going to happen in Washington, then this market looks really cheap. However, if some things that the market fears come out of Washington then it looks really expensive.”

A major reason that this market cannot sustain a rally is Washington. DC is a dam to the flowing of the river. In 2008, our attention did a 180 degree turn from analyzing balance sheets and income statements, industry trends and future markets to the comments of someone in a committee room within the Capitol building. More people were interested in Paulson’s TARP testimony than the earnings of a Dow stock, or what a CEO had to say about their business. Until the market can avert it’s eyes from Washington DC and concentrate on what really builds value, profits, the stock market cannot have a sustained rally.

Yesterday I wrote about Friday. Today was an end of the month, quarter day. There should have been, and there was buying interest all day to try and paint the tape green. However, so many people want to be short this market the sellers overwhelmed the buyers in the last hour of trade. Tomorrow is evening up day. The sellers will not push the market unless there is a headline that they can use to push it. Many players will even up, and it’s the first day of a new month so fresh cash will be there to buy. I still say if non-farm payrolls are only a little out of line, the market will rally. If they are a lot of out of line to the downside, look out. 750-850 on the S+P is not out of the question. Today it settled at 1030.

Sam Zell is a smart guy. He also said that November of ~~2012~~2010 was the most important election of his lifetime. I don’t think he got to where he was by using hyperbole as a motivator.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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