Technically in Bear territory...

Market volatility could not be stressed more - after a brief positive upsurge to the 13K levels by early May, the markets swung back to sub-12K levels as early as June mid. With the Dow currently at 11,300+, we are technically close to bear territory, about 20% below the last high. As in the early year fall, Financials were the worst affected...you can rarely see C at 17, WB at 16! Some of the big names are now trading at close to 1/3rd of their highs! Though I am tempted to say these are buys, would resist doing so considering what happpenned after the last such prediction. However, like the housing market, we are probably closer to the bottom.

The same cannot probably be said about the US equity market as a whole - Q3 and Q4 should see tough results too, especially retail, industrials and feeder service industries which bear the brunt of depressed consumer spending & unemployment highs. Drastic down turn in global stock markets like in India and China (The Mumbai Sensex is at 13,000 levels as against 20,000+ levels early this year!), fall in consumer confidence in Germany, UK and the rest of the Euro territory all means there is not a global growth story to counter domestic ails either!

Summer should see some positive news on increased consumer spending though, in line with seasonal cycles. Housing stats should see some relief too, aided by the seasonal pattern - though an upturn is probably still a way off, a perk in activity this summer should bring us closer to the bottom. The biggest spoiler could be Oil...any rise above the current stratospheric levels would make it next to impossible for the Fed not to further tighten monetary policy, which would further squeeze the housing and consumer markets. We should hopefully see some concerted action by the G-30 and OPEC in order to bring some sanity to spot and future crude prices. It's difficult to imagine busines and political powers not acting together to prevent any thing that could seriously affect economies globally.

I would rather not jump in to any contra-investments at this point, and take a wait and watch approach. Near-month call options on Financials might look pretty attractive, but not without associated downside risks. A normal turn of events should see oil prices cooling down, Fed keeping interest rates flat and summer activity giving the needed positive dose to this drab market.