Thursday, April 10, 2014

The Bitch Is Back - Stocks Crack Up

So much for yesterday's oversold snap back rally. Today the market faced reality and forced selling came back with a vengeance. What a change from yesterday's oversold rally. Then again, the facts have supported the bears and vicious rallies are the norm during market sell offs.  No one believes that this anemic recovery has caught fire yet without the help of the Fed. And The Fed appears to have run out of gas. Hence, the issue of deflation that Bernanke feared is still with us and getting stronger every day. The old expression applies: "Money makes the mare go."

The result is that the major indexes have broken some support levels. As one can see in the below charts, major support lies near the 200 day moving averages. For some reason, ahem, the talking heads on CNBC are all bullish. But that is CNBC's raison d'etre. After all, they need to have a bull market in order to keep up their ratings. Therefore, all we hear are so called experts talking about things like valuation, the long run, and so on. Message to CNBC: where are the people telling us about all of the negative economic statistics?

1 -Why do I have to read elsewhere that the Baltic Dry Freight Index is off to it's worst start in years?

2 -Where is the analyst who will tell us that new housing permits are dropping like a stone to new 2014 lows, AFTER the snow excuse period has ended?

3 - Why does no one talk about the Fed being clueless with weakening QE powers as they flip flop away from the taper while the economy weakens?

4 - Why is China's potential hard landing being ignored? China's phony stats?

5 - What is this media nonsense about the phony unemployment rate? We all know it is around 10%. And I am not talking about the discouraged worker effect. I'm talking about the chronic unemployment that is an aberration from history.  

6 - Why does no one talk about the flattening yield curve?

7 - Finally, how on earth can anyone believe in the jobless claim numbers when they are a fait accompli that proves that more people are ready willing and able to work but are not entitled to get unemployment? Inquiring minds want to know what's up with the CNBC financial media fix.

$NDX made another low for the run and is close to major support

$SPX has some catching up to do but broke down from some sort of head and shoulders top

Sentiment still lousy

Put Call Ratio Is Still Low*

The Number Of Bulls Is Still High*

$VIX Inches Up A Bit, But Still Low

McClellan Oscillators Turning Down But Not Oversold:

In sum, I believe there is more downside to go. How far down the market goes is for astrologists and soothsayers. I just say "red light."  This is not a market for bottom fishers or investors. There will be plenty of time to invest in the future. In the meantime, I will short the rips and cover the dips. And I will trade around positions a lot. I may even grab some long exposure during some rips as I did yesterday - see my tweets. But, I am not about to change my bearish stance until this atmosphere changes and a decent bottom is put in.

Unfortunately, in my opinion it is harder to make money as a bear than as a bull. And IMO, despite the momentum stock carnage, this sell off is tiny so far. It certainly can not yet be called anything but a correction within the context of a secular bull market.  That may change into a cyclical bear or worse. But there is no evidence of that yet. I was short QQQ and small caps via TZA today. I held TZA overnight and will short the other indexes as opportunity arises.

*Taken before today's sell off . Charts thanks to Charlie Bilello, CMT

BIG Capital Advisors and Seaview Partners are not responsible for your investment decisions. We believe very strongly in our opinions, but you must perform your own due diligence in making your investment decisions.
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