"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat

Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput


Friday, May 4, 2012

S&P 500 Back Below its 50 Day Moving Average

The S&P 500 continues to act like a market wants to break down much more sharply than it has hitherto done before. Its trip back to the 1400 level this week did not last very long as it met up with some rather heavy selling; selling that appears to be of a nature of one that is now looking to sell rallies rather than buy dips.

To confirm at least some sort of short term top in this market, I would need to see this thing close stronlgy below the 1350 level. That level held it in check back in February of this year so a  good close below it would tell us that even the longs are getting tired of holding this market higher.

Notice how the MACD indicator shows a market that has been basically GRINDING higher rather than one that has been moving strongly higher on good momentum. It is almost as if no one believes this thing should be where it is and yet it has kept pushing up.

Upside Momentum has now declined notably with the indicator barely registering above the ZERO level before it is now threatening to roll back over again.

If the Fed and the boyz are going to act to prop it up, they had better hurry because it has all the makings of a market that could make a very sharp downside move.

Keep in mind that the level of the US equity markets have now become "national security" issues as far as the monetary authorities are concerned. While they are high-fiving themselves over what they have managed to pull off in the commodity sector and in the Treasury markets where interest rates continue to plummet (GOOD - the US government can borrow even more money and pay next to nothing to the chumps that lend money to it), they no doubt are keenly watching the equity market charts.

Take a look at the weekly chart where the indicator is generating its first sell signal since early last year.


  1. In the immortal words of the "Fantastic Four"..."Its Cloberrin Time".

    What to do? Oh my? What to do? While Bernanke puffs on that big cigar, watching France turn Socialist, Germany planning on the return to the DM, and the imploding middle east. The Chinese said "May you live in interesting times". Well, we got em Dan. I want to hear how wonderful and magical the "meister" is from Mark ? He is so sure that everything can be managed. Well, at some point the LTRO will go full leverage, maybe as soon as Germany says, WE ARE OUT. Just loving the commentary, and knowing how so many will clamour and probably succeed in getting more so called "liquidity". It is in effect no longer liquidity but went to leverage and capital destruction in no time. Eventually, it will become a commodity traders dream. All in? June, July? Ah..the MSM, and Central Bankers have so many more tools. They are starting to smell full BS and failure. Have a great nite all.

  2. If stocks could get below SPX 1340, we would have a confirmed intermediate cycle decline, thereby setting up a launch point for the next rally. Being very late in the cycle count, we would also likely see stock quickly reverse higher. This view is supported by sentiment, as well. The short-term score published over at sentimentrader.com shows nearly as much bearishness as at the end of last summer's mini-crash. Whether or not we get a confirmed intermediate decline or simply turn higher from here, whenever the next rally gets sparked off, the move should be fervently higher.


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