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Enough is Enough! Market going lower

|Includes: ProShares UltraShort QQQ ETF (QID)

A euphoria reminiscent of the late 1990's and 2007 has taken hold in the newspapers, message boards, blogs, and virtually everywhere else where the phrase 'green shoots' has been uttered or written. The fundamentals of the economy don't justify this menagerie, which is why market is headed much lower.

Might I add, there are many supposedly bearish pundits on the web predicting a retest of 1200 on the S&P 500 before the next plunge using technical analysis, but I'm skeptical. Maybe we'll top out at 1010, but that's it. As the failed head and shoulders of early July has taught us-technical analysis can be unreliable-especially when too many people are anticipating the same outcome from  a given pattern.

Unlike in 2003 there is no catalyst for another economic and stock market boom. Instead of a shortage of housing there is a glut. The fed will not haphazardly leave rates at bedrock levels for inordinate periods of time, and consumers have become more frugal.

 In the states, Stocks are fairly valued following enormous rally, and valuations of emerging markets have already surpassed October 2007 levels. Keep in mind that in the Great Depression, early 80's and 70's recession stocks traded at a SINGLE DIGIT PE multiple.  At the nadir of the 2007-2009 bear market the PE ratio of the S&P 500 bottomed at around 12, so by no stretch of the imagination are stocks cheap.

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Yes, there is evidence of a  housing 'recovery' but it is tenuous at best. A few good numbers does not engender a trend, especially given the over supply from the last housing bubble.

In addition, unlike in 2002-2003 deficits are at historic highs, further constructing the fed's ability to leave rates at these historically low levels.Consumers are also becoming more frugal and are thinking twice before splurging on that new plasma TV.

Bottom line: stocks are going much lower; a retest of March lows for instance. Even if there are  no more major bank failures GDP growth will sputter at around 2% annum. Stock markets can transition form being wildly oversold to wildly overbought, and currently we're in the later.

Positions: QID SDS