30 April 2009

The Bearish Case as April Thankfully Comes to a Close

452 stocks in the S&P 500 are now trading above their 50-day moving average. That's 90.4% of the index.


As you can see on this chart, depicting three years of S&P history, 80% trading above their 50-day moving average is infrequent. But 90%? We now have a data point where no data point has gone before:

Barry Ritholtz took note of these S&P 50-DMA charts on his blog earlier today. Misery indeed loves company.

Moving on, Trader Mike still sees the need for a significant pull-back:

The technical picture remains about the same as it’s been for the last week and a half or so. The longer-term overbought indicators are still near extreme levels (T2108 is 88.4) and I still have to believe that the market is due for a pullback. But getting short just because of an overbought condition can be a painful prospect. The bulls are being stubborn and are still buying all the dips.

The ~875 overhead resistance level on the S&P 500 is still in play, barely:

But barely is good enough, for now.

On the fundamental side of things, there's plenty of bad news for this market to ignore.

First, it looks like Chrysler is going to go Chapter 11 later today:

Barring an agreement, which looked increasingly difficult, Chrysler was expected to seek Chapter 11 protection on Thursday, most likely in New York, these people said.
People briefed on the negotiations said that while it seemed certain Chrysler would survive and avoid liquidation, it was not yet clear whether it would have to be placed into bankruptcy to sort through any unresolved issues with creditors.

Guess my Chapter 7 prediction was a bit premature.

And second, Bloomberg reports that 6-out-of-19 banks will need additional capital. Apart from Citi and Bank of America, some other banks were singled out as likely to appear in next week's release:

SunTrust Banks Inc., KeyCorp, and Regions Financial Corp. are the banks that are most likely to require more capital, according to an April 24 analysis by Morgan Stanley.

My portfolio is now well prepared for a pummeling by the bulls. I fully expect the bulls to ignore the sound technical and fundamental factors featured in this post, as I continue to confidently lose money in this irrational market.

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