GARY ON THE NA– USEA!

The Fed tried interrupting the bearish action in the market yesterday by simply flip-flopping. Yellen and crew couldn’t care less about the economy, They are focused on the market. They know their printing of money has enabled assets to bubble up…supposedly helping the economy. They saw risk assets under pressure so what did they do? They pulled a Bernanke. Just change your stance and everything will be all better. Unfortunately, when all is said and done,printing money helps no one…and only creates distortions and bubbles.

So…we get a big pop yesterday as markets were oversold and caught shorts leaning. But immediately, the bearish market reared its ugly head. Today, markets were smoked as the all-important growth area continues to lead down. This is a big negative. It is also a negative that we are now starting to see financials roll over badly.

Remember our thesis. It did not start in the past week. It started a couple months back as all the characteristics that show up before a top of consequence appeared. We just had to wait for the ugly. We started seeing the ugly in the 1st week of March and despite the parking of “risk” money into the mega-cap, low beta, liquid-types, the action has been horrid underneath the surface.

The best way to describe our feelings right now is that the wheels are now in motion as prices are now heading lower with some heading lower sharply. We have no idea how long it lasts or how far it goes…but we know this is much different than the pullbacks we have been seeing over the past year.

Keep in mind, bear phases do happen. Markets just do not keep going up in a straight line forever…and because of the Fed printing of over $4 trillion, that’s exactly what has happened. But rubber bands stretch so far. The S&P was up 28% last year with earnings growth in low single digits. That will also only stretch so far. We suspect lower prices are ahead and first stop should be the longer term 200 day moving average for the weaker NASDAQ,NDX and RUSSELL 2000. That is a few percentage points lower.

More to come over the weekend as we are headed to the Masters to watch some great golf!