Thursday, August 14, 2008

worries on wall street

I have to admit being surprised by the strength of the bounce in stocks recently. I had expected more follow-through to the downside instead of this rebound higher.. this was partially because of the continued weakness in oil.

however, I see many things shaping up that are all bad for stocks.

first of all, the geopolitical situation has the potential to become less stable. the conflict in georgia and the looming departure of musharraf in pakistan could result in an number of unpleasant outcomes.

secondly, oil is not done with its upside. I would expect to see another rally in a month or two. few things in the stock market currently look as bullish as an oil chart.. most other industries are in full-fledged collapse and the evidence points to further economic weakness ahead.

we're bouncing higher at this point, but I wouldn't expect it to last. I would be surprised to see the sp500 close above 1320. I think we'll move sideways around the current 1290 level for another week or so before resuming the trend lower.

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