It's Tough to Be an Optimist Here

In addition to the not-so-great technical patterns in the indices, there are several other issues of concern. Earnings for the second quarter did not garner favorable responses overall. Market players were selling the news, unlike in the first quarter, and have not shown much interest in accumulating stocks that did produce good reports as they pull back.

Another issue of major concern to me is that the big driving force behind this market for so long is greatly diminished. That force is liquidity. For so long we heard how this market was being driven higher simply because there was so much cash out there looking for a place to go. Within a very short time we did a 180-degree turn, and we are now looking to central banks to provide liquidity. How can we expect liquidity to suddenly improve again and act as the driving force it was a few months ago when everyone is now saying that there were excesses and abuses?

A third issue I'm concerned about is seasonality. We are entering the toughest time of the year historically for equities, and that may be enough to keep some cash on the sidelines. Seasonality is definitely not a certainty, but it is something we should at least consider when looking at the bigger picture.

I'd prefer to be much more optimistic about this market, but to me the stage looks set for some struggles that may last a month or two. I'd feel better if I weren't reading so many positive predictions about this market, but we simply haven't corrected enough to create the sort of despair and negativity that comes at major lows.

We have a slightly soft open on the way as poor earnings from the likes of Wal-Mart (WMT - commentary - Cramer's Take) and UBS (UBS - commentary - Cramer's Take). Overseas markets are mostly down. We have the PPI report for July coming up, and that should generate a little action.

No positions.

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James "Rev Shark" De Porre is the founder and CEO of Shark Asset Management, an SEC-registered investment advisory firm. He also operates sharkinvesting.com, an interactive online community that serves and educates active investors. De Porre holds business and law degrees from the University of Michigan, is a member of the Michigan Bar Association and a former tax attorney and CPA. He lives in Anna Maria Island, Fla., with his wife and two children.Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Rev Shark appreciates your feedback; click here to send him an email.