The Relief Rally Unravels

www.whooah! : It's worth repeating here that this rally has largely been about speculation. One need look no further than the moves in some of these highfliers -- up 100% on the back of nothing. Joanie noted some figures this morning, via Bridgewater Associates: The collective market cap of eBay(EBAY Quote), Amazon(AMZN Quote), Yahoo!(YHOO Quote), and priceline.com(PCLN Quote) registers a modest $122 billion. With aggregate earnings of $25 million, that gets to a trailing P/E of a paltry 4, 878. Obviously, these stocks are about emotions, not earnings. I could give plenty more examples, but I think you get the point.

Meanwhile, as speculation continues, there's been no real improvement in the economy. Certainly, most tech companies have had few positive things to say. The refinance game is now a thing of the past. So, it continues to look to me like the second half is going to be rather difficult. Folks are going to be forced to deal with that fact, even though right now, they're only too happy to talk about things getting better.

Last winter, when I was constructive on the market rallying, I laid out a group of reasons to support my case. The rally ensued, and then some. Now it looks set to fall apart, and from a height that I would not have thought possible at the time, given what little has changed. With stocks priced even more precariously, and given how excited folks have become, the stage is set for some pretty rough sledding.

(Note: My scheduled television appearance on Neil Cavuto's show at 4:30 p.m. EDT today on the Fox network did not materialize. I got sent to the wrong studio.)