Hedge funds can't seem to catch a break these days.

They are being targeted by a broad S.E.C. sweep for information tracing back to the origin of rumors that swirled around trading in Bear Stearns and Lehman Brothers stocks. They now can't short some financial stocks in the way they used to, and the short-selling restrictions could become even tighter.

And now, rising financial stocks and falling oil are helping to make July one of the worst months in years for some hedge fund returns. Hedge Fund Research's global hedge fund index is down 3.16 percent so far this month. July could end up being the worst month since the index was created five years ago, according to Bloomberg.

Plenty of hedge funds with short positions in financial stocks took a hit when the government stepped in to bail out Fannie Mae and Freddie Mac, and the S.E.C. made it harder to short stocks in that sector.

The restrictions appeared to have helped traditional shareholders—shares in Fannie and Freddie have surged in the past two weeks. Even shares of Lehman Brothers, which continues to be plagued by speculation about its future, remain well above their lows reached before the restrictions went into place.

The price of oil also fell dramatically in the last two weeks, down more than $20 per barrel from peaking earlier this month at $145.

But there's no evidence this rally will last.

"Everything that went up was the most shorted," Christopher Watling, head of the research firm Longview Economics, told Bloomberg. "It was a classic short squeeze, a race to cover shorts, not buying because fundamentals had changed. It was a true suckers' rally."

Indeed, it's hard to muster the sympathy for some suffering funds, since stocks on the rise and oil on the decline are heading in precisely the right direction for the larger investing population.

It's also perhaps too early to conclude that this ugly July will be a sign of things to come for the rest of the year. After all, the Dow is down nearly 200 points today, led by a decline in financials. And oil? It's up 33 cents.