Thoughts

What's good is I still see little "excitement" regarding today's rally.

There is no excitement on the part of the bulls in most quarters. Nor is anyone that I can see saying that this is the start of something great.

In direct contrast to two months ago, the talking heads on CNBC are almost uniformly bearish; that's good.

Once again the U.S. Post Office is raising rates.

My favorite play on the news remains a short in Pitney Bowes.

The markets are tracing out a low for the year.

The markets are traveling on a path of fear and that share prices have significantly disconnected from fundamentals and from other risk assets.

I'm focusing on the mounting and extreme negative sentiment, the more positive employment signs within the June nonmanufacturing ISM (and in the Conference Board's Employment Trend Index) and the continued overall strength of the combined June manufacturing and nonmanufacturing ISM. All these indicators pointed to upbeat payroll growth and a moderate domestic economic expansion over the balance of 2010 and into 2011.

Also, despite the schmeissing in stock prices, other risk assets and credit metrics improved last month. Specifically the two-year swap spread, three-month LIBOR, the TED spread and junk bond interest rates all declined. Meanwhile the euro rose and even stock prices in several European bourses rose in June.

Meanwhile, negative sentiment is building up. As evidence, I observed the deeply oversold oscillator and the increase in the relationship of bears to bulls in the Market Vane survey (which is closing in on March 2009 levels). Also, Cassandras were in full force of late. The Sunday New York Times had a prominent interview with Robert Prechter (who predicted a depression in stock prices -- and a Dow Jones Industrial Average of 1000) while CNBC dragged out Dr. Nouriel Roubini to guest host "Squawk Box" on Tuesday.