Editor's note: This column, which reflects market activity from the day before, originally appeared June June 23 on RealMoney.com. To sign up for RealMoney, where you can read Bill Fleckenstein's commentary every day, please click here for a free trial.

Overnight, Europe was slightly soggy, and the rest of the world was a snooze. Our futures were doing next to nothing until the market opened, when they basically headed straight down. Two hours into the day, the Dow and the S&P were off a percent and change, and the Nasdaq was down a deuce. The early going was in essence an equal opportunity to the downside, except for housing stocks, which hung in there pretty well and ended up as today's port in the storm. Not much changed over the course of the day, other than a modest sharpening in the declines.

Prospecting for Post-Cut Clarity: Away from stocks, the long bond was up a buck, but fixed income in Japan was slightly under pressure, with yields up 4 basis points. Currencies were a mixed bag, with the euro particularly heavy and the Canadian dollar and the yen a tiny bit stronger. The metals were mixed as well, with gold down a little better than 0.5% and silver up over 0.5%. A few days after the FOMC meeting, we may get some clues as to whether the correction in gold has run its course, or if we have more time to go. But just as I think there's a good chance the equity market will have seen its peak by the Fourth of July, perhaps a correction in gold and foreign currencies will be over by then. It's just a working hypothesis at the moment. Again, we'll have to see what those markets look like during the next week.

Now on to the major topics du jour: sentiment and the upcoming FOMC meeting. Everyone, of course, knows that Investors Intelligence shows over 60% bulls and 16% bears. It's a reading that's never been more lopsided since the spring of 1987, which I believe is saying something. Bullish sentiment was also on display in the midyear update of Barron's Roundtable, which ran this past weekend. Interestingly, besides the bulls being more bullish (surprise, surprise), the bears who I find thoughtful, led by Felix Zulauf and Marc Faber, appear not to be bearish for the moment. They allowed as to the prospect that the rally could continue, or that the economy might be in a sweet spot for a bit.

Playing Bear Solitaire: The reason I bring this up is to underscore a point: Hardly anyone is bearish. I myself have not been operating bearishly, as I have been waiting for this rally to play itself out. I have a very dim outlook for the second half, yet virtually no one seems to share that view, other than my good friend Fred Hickey, or Stephen Roach (more about him in a minute). As I continue to reappraise my assessment, I ask myself, what is it that these folks see that I do not see? Why is it that they are so lathered up about this particular moment in time and this particular Fed rate cut?

A few things come to mind that separate the environment right now from other bear market rallies: 1. Many people were just tired of being bearish. 2. The market has been rallying for a time now, and it's currently up on the year. 3. In February and March, many folks feared terrorism and war. Those fears in particular made me nervous about being short back then (i.e., folks were bearish for the wrong reasons). But these reasons don't tempt me to change my view.

Index Close Change
Dow 9072.95 -127.80
S&P 500 981.64 -14.05
Nasdaq Composite 1610.78 -33.94
Nasdaq 100 1200.23 -22.90
Russell 2000 439.41 -10.15
Semiconductor Index (SOX) 363.09 -7.94
Bank Index 859.29 -14.51
Amex Gold Bugs Index 148.40 -5.32
Dow Transports 2394.70 -48.19
Dow Utilities 251.47 -2.90
NYSE advance-decline -1,667 -1,570
Nikkei 225 9137.14 +16.75
10-year Treasury Bond 3.32% -0.081

Lip Service vs. Embracing the Bubble: More importantly, it strikes me that many people fail to understand that we had a bubble, and that it has created long-lasting, unavoidable repercussions. They can say the words "We had a bubble" but never get beyond that to accept the implications. So, when you put a summation sign in front of all this, it adds up to folks being particularly optimistic (more so than at any time in 16 years) about right here, right now, when in fact it's just another bear market rally and rate cut.

Now perhaps the cumulative effect of the previous 12 cuts will make the 13th magical. Perhaps the cumulative effect of what's gone on from a downsizing standpoint may matter. Perhaps the economy will see a bounce, but I find it unlikely that we will see anything more than that, if we even get that. To summarize, the bulls have yet to come up with a persuasive argument for their case. I still firmly believe that the second half is going to be a disappointment, both in the economy and the stock market.