Two reasons why the August rally in US equities will end badly

1.) Corporate executives and directors sold about 30 times as much stock as they bought in August. Perhaps, they sold from a position of knowledge advantage. Meanwhile, sheepish mutual funds and retail investors gobbled up rising shares. Of course, these shares are typically part of compensation along with a salary, and executives sell them for cash needs, Yet, in a typical month the ratio is 7:1. Certainly, executive's personal cash needs don't explain the entire gap: they likely recognize the overbought conditions of their own companies. But the fact that corporate executives were scrambling for cash, (perhaps to cover mortgage debt?), still feeds into the second reason that the equity rally won't last.

2.)The fundamentals of the U.S. economy are still dreadfully weak.

In July Non-Farm Payrolls declined by 247,000. Consensus estimate among economists is for a loss of 222,000 in August, with data to be released this coming Friday. Non-Farm payrolls is highly subject to statistical aberration, given that it is released monthly, but the trend of job losses is clear. How are the unemployed going to fuel a rebound?

If Non-Farm payrolls surprises to the positive(i.e. less than 222,000 jobs lost in August), the rally could revive temporarily, but this will just make the pigs fatter for the slaughter. The talk of "positive second derivatives" is absurd, even if you have full faith in the statistics. The trajectory of the economy is not entirely linear. One a couple months of slightly less negative data does not make a recovery. As it is the economy will need to add a lot of jobs before consumers can get back on track to boosting the economy.

If non farm payrolls surprise to the negative, short sellers will have a heyday before the long weekend. In July, nearly 5 million U.S. citizens had been looking, but unable to find work for more than 27 weeks. As unemployment insurance runs out, they will be no help in the recovery.

For the speculators: Deep out of the money puts on the Dow and the S&P, or major other indices not just in the U.S. but globally. According to the Financial times, put/call ratios on the S&P have already spiked upwards, indicating a rising bear. Moreover, futures on the VIX, a measure of volatility, or investor fear, have also spiked.

For the highly risk adverse: don't listen when your advisers tell you to take the money out from under your mattress.