Wednesday, July 22, 2009

Stock Market "Hurricane" Season Just Ahead

Sometimes a rotation away from a leading sector can be bullish for the stock market, but when you have a sector, the banking sector, that has lead an up move, slowing down without any other clear leader, watch out below.

The U.S. banking index had a 146 percent upswing from the March lows, but of late it can't seem to break to new highs. The index peaked in mid-May.

Further, as I have warned many times, the Fed is not printing any money at the current time. Couple this with the fact that August begins the start of seasonal down trend in the market and we could be in for a lot of trouble.

It is not an accident that so many stock market crashes occur in October, it is the period of great consumer intensity away from savings and toward consumption. New school clothes, winter clothes and preparation for Thanksgiving and Christmas. From mid-August to December, October is at the vortex of a shift toward consumer buying, away from savings--which includes stock liquidation.

If Bernanke keeps up his no money printing stance, there is a huge market break coming. Don't be sucked in by any short term rallies. The money isn't there to support them long term. Plus, at the same time, we are headed into the seasonal stock market "hurricane" period.

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