What is Maria smoking in that studio?

MUSCLE? +3 on the S&P?

Oh boy.

Here we go, back to the facts:



Cute little chart, isn't it? See that nice little pin that poked up through the channel? That was an attempt to penetrate the channel - third attempt in three days, in fact.

Three attempts, three failures.

If you read the morning post, you know that our jobs report sucked. Oh, and there are lots of signs that the Consumer is, or is about to, go in the toilet - warnings for April sales shortfalls abound, from Circuit City to Target to WalMart and down the line. The two are kinda related, you know!

We've got a major problem here and its spelled "Consumer finance." Here's the latest on the mortgage mess:

"Three hundred billion dollars worth of adjustable rate mortgages are set to re-set in the next two fiscal quarters. We've already seen what happened in the first quarter of this year. Foreclosures spiked, lenders balked and the spring housing market shut its shutters. Every industry association, from the Home Builders to the Realtors, revised their forecasts, pushing any thoughts of a recovery back from 2007 far into 2008.

"This is just the tip of the iceberg," said First Capital CEO John Kiefer on CNBC's "Power Lunch." Then, "There will be pain and blood in the street." Wow, this from a guy who sells financing products. Oy."

And then there's this from Hovnanian:

"Hovnanian Enterprises Inc. said Friday its second-quarter loss will be wider than previously forecast after selling fewer homes amid continued-tepid demand in the housing market."

Hmmmm.... but.... but.... but... the economy is good, right?

Not according to that commentator.

Not according to our economic data.

Not according to the jobs data.

Not according to all the companies that are warning of missed April sales targets.

The premise remains the same - the channel is tightening, the market is unable to penetrate it, and while the SPX is the tightest channel the DJI and Naz have similar formations and have poked at it but not blown through.

On a pure technical basis the Nasdaq lost a bit of momentum today as did the SPX. The DJI actually added a bit, and is now insanely overbought, registering a 78 (>70 is "overbought".) Both Stochastic indicators are likewise in "nosebleed" territory.

Now here's another interesting factoid - according to Dow Theory, for a move in the Dow to confirm the Transports must reach a new high when the DOW does, or its not a "real" rally. Weeeelllll.... the last week that hasn't been the case. While the Dow has been rising the last week, it topped on the 25th (26th if you count intraday.)

Do NOT believe Kudlow on this point. He keeps saying the "Transports are reaching new highs." Bull! Here's the chart Larry - you're a bald-faced liar:

If you lie to people on national television, and I hear it, I'm going to call you on it!

Is a rollover imminent?

Difficult to tell. The Trannies definitely don't say "buy buy buy!" though.

I remain unconvinced. While the S&P500 A/D line was pretty good (26:21) it wasn't "standout great". The Nasdaq 100 was even thinner, at 51:48, and if you backed out Yahoo (the subject of a buyout rumor) the Nasdaq was down today.

I'd like to buy into this rally but if its a siren song of BS I'm going to get my butt handed to me. This sort of sideways grinding not only doesn't make you any money it can cost you a bundle if it reverses out from under you.

In fact, the longer this continues the less likely it is that the breakout to the top happens at all. Its simply a reality issue - you can bang your head on the ceiling only so many times before either it cracks or you crack. We've done three "pounds" so far without penetration on the SPX, and now the question becomes - "how hard is the market's head?"

Oh, one final thing - if you think you can trade on inside information and get away with it, you might think twice.

"A federal magistrate judge denied bail for a Credit Suisse Group investment banker charged with insider trading after ruling he is a flight risk."

Just don't, eh. No bond. Oi. Is it really worth it guys?

More this weekend if and when its warranted.

PS: The Cat is still chasing the Canary, and grinning wildly.......