I believe the market should rally for a couple of days but I will be looking to use strength to rehedge my portfolio. The reasons are as follows:
- The European rescue fund(EFSF) is still not available and will not be until European parliaments approve it in the Fall. In the meantime European markets are acting up and there are no means with which to combat it.
- I believe the economy is weakening and things will have to get very bad before we see stimulus, with balancing the budget being the top priority.
- Seasonality will soon turn negative and August has on average been a down month since 1990.
- I believe there is a good chance we will see extreme pessimism this Summer, which we are not seeing now with 50% Investors intelligence bulls.