Feeling Rather Nervous

Granted, the trading day is not near over -- but here are some developments of this week that have me feeling uneasy about the status of the current rally and possibly in Doug Kass' camp which calls for a market pullback (maybe of 10%):

(1) Economic reports this week were not horrendous; in fact, a number were modestly surpisingly positive. Yet, the market has failed to break through its 1148-1150 ceiling. Moreover, when it did break through this morning, it has now subsequently given back all gains and fallen below the ceiling level.

(2) Bank stocks are declining and that may signal a move lower as a whole for the market. Recent analysis has revealed that the banks are about to enter a very troublesome earnings period in 4Q 2010 and that they'll require layoffs as investment/trading has been so dire throughout the year. The lack of true revenue growth and profitability in financial stocks significantly limits the ability of the market as a whole to move higher.

(3) European debt issues remain on the horizon -- as do state and local government budget shortfalls. These issues aren't new and they aren't going anywhere. But to pause and think on their scope -- Ireland and Greek debt issues will take years upon years to dig out from. US debt depends on moderate growth of nearly a decade to reconcile. And local governments (which receive 1/3 of their budget from state coffers) are just starting to truly face the shortfalls in their revenue streams and budget situations.

(4) Tariffs, taxes and protectionism -- these are NOT helpful in encouraging commerce and yet, not dissimilar from the mid to late 1930s, all of these are beginning to take form presently (seen in higher taxes on the horizon in the US and multiple new bills being passed by Congress against China).

(5) The recent rally was partially built on expectations of Fed doing more quantitative easing (QE2). Recent comments have shown that Fed actions may not be as great as expected and many believe that the effects will be less impactful than during QE1. This realization undermines the Sept. gains.

(6) Doug Kass has noted the low volume, technical 1150 level resistence and barely positive economic reports as class motivators for a false rally and subsequent market pull back of 10% or greater.