Hi Everyone,

I have been advocating for some times now that I believe the markets are overvalued and that the current scenario is not sustainable.  I still believe that, my timing being a little off, but there are some indications that we might have seen the market peak for the year.  Let me give you some points:

• Looking at the market volume, on how the market closes off the day’s high are indicators that we might have seen the peak for now.
• I believe that the market has been pricing a no-passing by Congress of both Cap & Trade and comprehensive Health Care reform into the market.  As this likely will become a reality this fall, the market might sell off on the good news just like it does when a company comes out with good news after months of speculation.  If these two legislation are passed, we will have a considerable sell off as people assess the coming damage to the US economy.
• The economy has stabilized, but there are still many issues to resolve and reality will eventually hit the markets.
• With the Fed chairman Ben Bernanke being reappointed, I hope he will be acting less like a politician and start doing what will be best for our economy.  I am not sure how the market would react to an increase in interest rates.  The initial reaction might be negative, as the short term effect of higher interest rate would stifle growth but would aid in the long term healing of our economy.  This would certainly also help our currency.  Stop creating all the money will also help.

So if you have capital gain from securities you purchased during dark days in spring, you might want to realize some.  Our economy has stabilized, but is nowhere near a major spike.

As always, please feel free to comment.

Cheers,

Patrick