We are quickly approaching the end of the positive seasonal cycle for stocks. As we do so, the question remaining is can the stock market find a tradable low this week and rally to higher reactionary highs in July? Since short interest remains elevated in technology, industrial services, energy, finance and minerals, so anything's possible.
The price of oil pulled back below $60 a barrel, and the traders who are not on vacation are hoping that Alan Greenspan will give the markets some encouragement on the interest rate front. If Greenspan does give a positive spin on interest rates and the economy, the markets will rally one more time before settling into a deeper correction that could take the market averages down 5-10% from their reactionary highs.
The first quarter GDP numbers were revised higher to 3.8 percent compared to the previous reading of 3.5 percent growth. Most economists were expecting a revision upward to 3.7%.
Given the strength in the economy, I doubt very seriously that Greenspan will stop raising rates until economic weakness becomes obvious. When it does become obvious, we will be on the brink of recession since higher interest rates take time to filter into the economy.
This market is showing signs of being dull for the remainder of the summer. The only excitement that I can see thus far will probably be to the downside.
