437 Stocks of the S&P 500 Trade above Their 50-Day Moving Average

875 Resistance Level on the S&P Holds Yet Again

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.

Oy.



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.

Portfolio Changes

Call me a glutton for punishment (pigs are known for their gluttony), but I added some more shares of FAZ today at $8.45, bringing down the cost basis of my position to $9.30. My next move regarding FAZ may be to eschew the shares themselves and pick up some FAZ calls, instead. But I'm not there, yet.

Superchunk

Superchunk recently released a new EP after 20 years of playing together. I certainly feel younger when I listen to the 'chunk. You can, too, at their Merge Records page.


ABC News Amplified has a fawning interview with Mac McCaughan. Embedding has been disabled, so right-click on the link if you want to watch it.

Here are a couple of videos of "The First Part." One is from the recent Coachella; the other the original video. This song's riff is one I end up playing if I have a guitar in my hands for more than ten minutes.

If Bears Can't Generate Profits, They Sure Can Generate Charts

The market actually went down today, and for the most part, stayed down. I guess it took a pig flu pandemic scare, an earthquake, and a low-flying plane over Lower Manhattan to take down the market. Or not. Perhaps it was just a small Monday sell-off in an overheated market.

Here are some basic charts I'm taking into trading tomorrow:





Tim Knight offers up a bevy of additional annotated charts supporting his thesis that more weakness is coming. Here are two of them, the Russell 2000 and the S&P 500:





Mike Shedlock offers up even more technical indicator charts supporting the bearish perspective. Again, here are just a couple plucked from his blog post:

Another Day, Another Attempt to Make the Bearish Case

Another day, another attempt to make the bearish case, i.e. talking my book, in the face of tremendous bullish headwinds.

Fundamentally, when company insiders are buying up shares hand-over-fist, it's generally a good signal to join in on the buying activity. And when insiders are dumping shares, it's best to dump along with them:

Executives and insiders at U.S. companies are taking advantage of the steepest stock market gains since 1938 to unload shares at the fastest pace since the start of the bear market.

Gap Inc.’s founding family sold $45 million of shares in the largest U.S. clothing retailer this month, according to Securities and Exchange Commission filings compiled by Bloomberg. Daniel Warmenhoven, the chief executive officer at NetApp Inc., liquidated the most stock of the storage-computer maker in more than six years. Sales by the co-founders of Bed Bath & Beyond Inc. were the highest since at least 2001.

While the Standard & Poor’s 500 Index climbed 26 percent from a 12-year low on March 9, CEOs, directors and senior officers at U.S. companies sold $353 million of equities this month, or 8.3 times more than they bought, data compiled by Washington Service, a Bethesda, Maryland-based research firm, show. That’s a warning sign because insiders usually have more information about their companies’ prospects than anyone else, according to William Stone at PNC Financial Services Group Inc.

“They should know more than outsiders would, so you could take it as a signal that there is something wrong if they’re selling,” said Stone, chief investment strategist at PNC’s wealth management unit, which oversees $110 billion in Philadelphia. “Whether it’s a sustainable rebound is still in question. I’d prefer they were buying.”

...

Insiders from New York Stock Exchange-listed companies sold $8.32 worth of stock for every dollar bought in the first three weeks of April, according to Washington Service, which analyzes stock transactions of corporate insiders for more than 500 institutional clients.

That’s the fastest rate of selling since October 2007, when U.S. stocks peaked and the 17-month bear market that wiped out more than half the market value of U.S. companies began. The $42.5 million in insider purchases through April 20 would represent the smallest amount for a full month since July 1992, data going back more than 20 years show. That drop preceded a 2.4 percent slide in the S&P 500 in August 1992.

Then there's this batch of macro-level bad news from David Rosenberg c/o Zero Hedge. Bottom line, Rosenberg says the announced reduction in automotive production, the lack of a bottom in the housing market, and the rise in the unemployment rate to 9%, then to 10% all points to the continued degradation of the U.S. economy.

Looking at some charts, the S&P still climbed this week, yet the ~875 resistance level is still holding, and the MACD is now showing negative momentum:




Looking at the $SPXA50 chart, we're at 11 days-and-counting with more than 400 of the S&P 500 trading above their 50-day moving average. When you're holding leveraged shorts like TZA and FAZ in a market like this, it's fraking annoying. And I know, I recently examined the interminable stretch (for the bulls, at least) when fewer than 100 stocks in the S&P 500 traded above their 50-day moving average for 48 trading days. In that post, I didn't even bother to point out the recent 15-trading-day period in February and March, when again, fewer than 100 S&P 500 stocks traded above their 50-day moving average. Let's just say I have some Obama-esque hope that the markets pull back next week. These bearish-case posts are getting to be a bit tedious, and repetitive.

Super Furry Animals

My second-favorite Welsh product, after Doctor Who...

"The Very Best of Neil Diamond" off of the new Super Furry Animals' Dark Days/Light Years:



And some SFA classics. Check 'em out; they still respect the video as an art form:





Receptacle for the Respectable, featuring Paul McCartney chewing percussive celery:



Then I found this a cappella version from a Carleton College group. They replace the death metal ending with a more appropriate, show-offy close:

Chart Pattern Trader Loves FAZ

I added another newly discovered blog onto the Pig Pen blog roll, the Chart Pattern Trader.

On yesterday's video, the Chart Pattern Trader saw "bearish sign after bearish sign." He listed major overhead resistance, bearish divergences, trend breaks, bearish indicators and candle patters while summing up his negative position on the markets. Here is his brief rundown:

The reversals are panning out, with the right shoulder of a head and shoulders pattern looming over the S&P 500 chart. I explore more strategies and reversal signals on the charts. I bought all my shares back and added to my positions of SDS, QID, and FAZ. Look for the explosive sell off over the next two sessions. Remember, we will get word on the stress tests of the banks on Friday. Moreover, 25 % of the corporations on the S&P 500 are reporting this week.

For purposes of my portfolio, the Chart Pattern Trader analyzes FAZ starting at 20:25 and continues until 27:15, when he switches over briefly to looking at the chart of SKF, that old-school 2X-short financial ETF. If you're interested in the fate of FAZ, you should watch the video, but bottom line, he sees a likely break above the recent $13.26 peak, and a move significantly higher from that, with a short-term target of $25. I personally can't see holding my shares of FAZ straight through these healthy targets, but these forecasts may convince me to continue trading in and out of just the short side.

New Trading Blogs (At Least New to Me) and Their Consistent Bearish Outlooks

I seem to be getting introduced to several trading blogs of which I was previously unaware, like Slope of Hope, Quantifiable Edges, Zero Hedge, and The Financial Ninja.

Speaking of the Financial Ninja, he called Monday as the day the Trend changed:

Reasons why the sell off yesterday was not just a profit taking correction, but a trend change.

1) Yesterday was a Major Distribution Day. When this occurs AFTER a large, long rally it signals a trend change.

2) After a big decline in volatility (VIX) the sell off was confirmed by a 15% spike in the VIX.

3) The US dollar index (USD) strengthened, clearing resistance and is now above both the 20 and 50 day EMAs. A strengthening dollar represents a flight to safety and foreshadows weakness in equities.

After all, the market is The Most Overbought Market in at Least 23 Years.

That last link directed me over to Quantifiable Edges who corroborated the idea that unfortunately, deeply oversold markets offer superior swing trading signals than deeply overbought ones:

As you can see above, returns have generally been positive following other times the indicator has reached extreme levels. On the low end the results are about the same as the long-term market drift. While not shown, periods leading up to 20-days are also all generally positive. As the indicator moves higher the results look even more bullish. But instances are incredibly low, so not much can be extrapolated. I see two points to take away from this exercise: 1) When the market gets extremely overbought that is not necessarily a bad thing, and on its’ own is certainly not a signal to sell short. 2) By this measure the market is now more overbought than it has been in at least 23 years.

And a reader kindly pointed me to Tim Knight's Slope of Hope blog. Knight looks to be targeting ~815 on the S&P, which I find to be quite agreeable with my market outlook. Click on the link not for his simple chart, but also for the 120+ comments/discussion he generated.

SPXA50 Chart for April 21

The SPXA50 climbed back up to 425. 85% of the S&P 500 is now trading above its 50-day moving average. Click on the chart below to enlarge:

Portfolio Changes

I picked up some FAZ during the last ten minutes of trading at $9.63 and at $9.30, or at an average cost basis of $9.56.

As I write this, according to Google Finance, ~340M shares of FAZ traded today, compared to a 92.5M average. Its inverse counterpart, FAS, traded ~481M shares.

And there was a moment earlier today on CNBC when the stock ticker crawl only showed FAS trade after FAS trade.

S&P 500 Short-Term Forecasts

The Pig is in short-term trading mode, keeping an eye on the Russell 2000 on behalf of my 3X-Bear R2K ETF, TZA, as well as looking for enticing opportunities to trade the FAS/FAZ combo. Aside from those, I'm interested in keeping abreast of the S&P 500 and its action over the coming weeks.

Carl Swenlin at Stockcharts.com's ChartWatchers blog posted several nice charts showing a likely short-term pullback in the S&P 500. Click on the link for all of the graphical goodness. If you don't need the visual evidence, here's Swenlin's conclusion:

Bottom Line: Based upon my perception of market behavior versus indicator status, I am expecting some kind of correction, possibly a short consolidation -- a week or so -- or a quick, scary couple of down days. Regardless of how the overbought conditions are cleared, I am assuming that the rally is not over and will persist for at least a few more weeks.

Today qualified as a "quick, scary" down day:



We'll see if the gravitational pull on the market continues tomorrow. A quick look at the $SPXA50 chart below shows that the number of stocks trading above their 50-day moving average dropped from an ionospheric 448 to a mere stratospheric 413:



Zero Hedge offers up some more technical analysis suggesting 816 as a potential downward target for the S&P, which is only a 2% drop from today's close. Again, this is a short-term target (Zero Hedge's linked report calls for ~April 30 as the target date, what with Chrysler's presumed Chapter 7 filing coming around that date). That seems like a conservative target to me, considering today's thorough sell-off.

Trader Mike took note of today's sell-off, pointing out the steep upward trendline has now been broken, meaning the short-term trend for the market is now negative. But it's not yet time for the bears (or a certain Pig) to celebrate and run rampant:

I think we all knew this selloff was coming, the only question was when. This was the biggest drop in several weeks and has broken all the March trendlines on the major indices. The bulls didn’t even put up a fight at those trendlines, which is a big change from the past few weeks. Financials led the way down, thanks to Bank of America (BAC). Despite BAC’s 24% drop today the chart doesn’t look terrible. It’s just back to where it was about a week ago. Let’s see if it can find support around the late March highs.

Portfolio Changes

I wrote yesterday that I would be "ready to sell if some quick-and-dirty profit opportunities come my way."

As Snagglepuss says, "Exit, stage left."



A few moments ago. I unloaded my FAZ position at $10.87, from a cost basis of $8.85, for a gain of 22.8%.

Yes, FAZ has continued its run, crossing $11/share as I write this, but again, the FAZ purchase was for a quick trade, unlike my improving TZA position.

Thoughts on the S&P 500 for the Coming Week

89.6% of the S&P 500 is trading above its 50-day moving average. That's 448 out of 500 for the mathematically disinclined.

I seem to be posting updated versions of this chart every few days now, as this market continues to defy gravity and rationality.



Again, I ask the question, will this market rally end soon?

Looking at the S&P 500 chart below, you'll see that some significant overhead resistance, as well as some short-term overbought indicators, could put the brakes on this rally:



Corey Rosenbloom at Afraid to Trade sees a potential bearish rising wedge forming in the S&P 500. Click on the link and check out the post on Afraid to Trade for his annotated chart, but here's the suggested strategy:

The expected play at a minimum is for a retest of the rising trendline around 850, but aggressive traders might want to hold on for a larger target should price weasel its way out of the wedge formation, which would be quite bearish. Should price continue to rally and break outside the wedge, the stop-loss point would be clearly defined.

Portfolio Changes

Since I still believe that this irrational rally is overdue for some subsiding, I picked up shares of FAZ at $8.85.

Fozzie has fallen ~70% over the last month. The chart below shows the underlying index for FAZ, and its red-hot performance during March and April. Yes, I'm bucking the trend here, so I'm ready to sell if some quick-and-dirty profit opportunities come my way.

When Will This Bear-Market Rally End?

When will this bear-market rally end?

I recently discovered a hyper-prolific blog that's asking the same question from a variety of angles.

First, an excerpt from the Barclays note care of Zero Hedge:

It is fair to say that just about everyone is bewildered and trying to understand when this rally will end.
...
Normally, when we call for a trend to stop, we need to see three things. First, the trend has to have been strong and dramatic. Second, the trend has to have recently increased its trajectory in a hyperbolic way, to have accelerated its performance. And third, we need to have seen the trend reverse the clear majority of the prior trend.

On all three dimensions, we believe the current market conditions are clear and unambiguous. The current trend is strong and dramatic. We have clearly seen the trend accelerate, with the performance now coming from the tails of the distribution. And, we have reversed far more than the build-up of the prior trend. Think of a rubber band. What we are trying to identify is when the rubber band has been stretched far past its normal state. We believe unambiguously that we are at that point today.

All of this was true a week-and-a-half ago so we felt comfortable then calling for an end to the underperformance in Sentiment and the outperformance in Valuation. Today, we feel even more comfortable. And while on average, it takes 10 to 15 trading days after this condition has been met for the reversal to take hold, so we still have time, we certainly haven’t been proven right yet. As a prior boss repeatedly reminded me, and I humbly note here, there is no difference, though, between being early and being wrong.

Today, Zero Hedge pointed to the one month T-bill offering a fear-reflecting 0.01% yield:

Last levels seen during the fiasco after the November crash. Was at 0.08% two days ago. All money is running for near term safety, despite CNBC's urges for tresury investors to jump into equities - well, the opposite is happening...Maybe the real money is seeing something, and is accelerating purchasing of T-bills into this melt up.

Equities: have fun buying stuff.

How about we look at some charts that should make us feel better about questioning the post-nuclear-cockroach-like survival of this rally.

Here is the three-year chart of the $SPXA50 showing 88% of the S&P 500 is currently trading above its 50-day moving average. Breaching 80% is infrequent. 88% is downright rare, and at the very least, hasn't happened in the past three years:

Here is an annotated chart of the put/call ratio. The low 10-day moving average of the put/call ratio suggests the market is far too optimistic. Except the recent low reading from mid-March only slowed down the pace of the current rally--it didn't signify a market turnaround. Harumph.

And here's my current focus, the Russell 2000. I went short far too early, it seems, as the R2K is indeed jamming right up against both the overhead resistance levels established in January and February, and is near the top of its current bull trend channel.

This market looks so ripe that it's overdue for a bit of rot to form. Maybe I'll keep all of this negative evidence in mind tomorrow, and day-trade some under-$10 FAZ. I mean, what could happen? The market rises another 2% on more bad news?

Bob Mould is Back

Bob Mould is back with out with another record, "Life and Times." Newsweek, of all media venues, has a Q&A and video with Bob.

Here's the YouTube version of the aforementioned video:



And for old times' sake, here's the video for Sugar's heavy and catchily cacophonous "Tilted":

Balloon Man

I recently heard this classic while leaving my ipod on shuffle.

Why do I like the song so?

The chiming guitars. The walking bass. The Midtown locales mentioned. And the line, "and it rained, like a slow divorce." Those are plenty of reasons, I think.

Here's a live video of recent 2007 vintage. I think I saw him in Hoboken on this tour, not that you care one whit.



Unfortunately, the original video is nowhere to be found on YouTube, so you'll have to settle for the original song:

Russell 2000 is Flashing Warning Signs

Russell 2000 is flashing warning signs, reports Lynn Thomasson at Bloomberg:

The Russell 2000 Index’s record one-month gain is sending danger signals to investors who remember how similar rallies in U.S. stocks came to an end.

The gauge of companies with a median value of $301 million is beating the Standard & Poor’s 500 Index, where stocks have an average market value of $6.5 billion, by 9.8 percentage points. Gains in the Russell 2000 are being led by an 11-fold jump in Spansion Inc., a bankrupt chipmaker, and a sevenfold rise for Hayes Lemmerz International Inc., a wheel manufacturer that hasn’t had a profit since 2006.

While small-caps tend to lead the way out of bear markets, when they have outpaced larger stocks by this much, both indexes erased gains and fell, according to data compiled by Birinyi Associates Inc. Increased trading and ratios of advancing to falling stocks have also risen to levels that preceded declines, boosting investor concerns that the S&P 500’s 27 percent advance since March 9 will end the same way as the 24 percent rally that fizzled in January.

“This move is too explosive to be sustainable,” said Jack Ablin, chief investment officer at Chicago-based Harris Private Bank, which oversees $60 billion. “None of the structural underpinnings of the market have really changed. It’s going to be a multiyear healing process.”

...

Steeper jumps for small-cap stocks one month into a rally are signs of indiscriminate buying and usually come before equities fall, said Cleve Rueckert, a Birinyi analyst. The Russell 2000’s 36 percent climb since March 9 is its steepest since the index began in 1979, according to Bloomberg data.

...

“It’s unusual for a new cycle to start with such an abrupt gain,” Rueckert said. “Bear market rallies are broad. Everything goes up really sharp, really fast and not necessarily for a particular reason.”

None of the bull markets tracked by Birinyi included small- caps outperforming after a month by the rate they are now. On average, smaller stocks are tied with the S&P 500 at this stage of a lasting recovery, the data show.