Michael Clark's  Instablog

THIS MARKET HAS NO PULSE

What do I mean by this? We had a bit of a rally at the end of the week. Some stocks made new highs. Are we not just ready to go higher after a bit of panic-selling spurred by massive liquidation in gold (margin-call on some heavy-hitter, or a central bank?), and horrible earnings coming in from many sources?

Perhaps. It is very hard to short a market when interest rates are at 0% and central banks are feeding the markets with free money and corporations are buying back their own shares financed by free money.

Am I still short this market?

I am cautiously short this market. I have tried to take on Ben Bernanke before; this ended in short-lived tears. Have I not learned anything?

I have recently developed a market indicator that essentially shows the market pulse. And a market that loses its pulse is vulnerable on the downside.

Let's look at charts of the DJIA during the Great Depression era and see what I mean by a market losing its pulse.

The Pulse is the red line in the First Pane. It is surrounded by a blue box that is also a kind of pulse measure. A stock that is climbing will show a very active pulse, both in terms of the blue box rising, and with a dancing red pulse.

The Second Pane is also useful in that it is at the tope of the chart when a stock or index is making higher highs and higher lows.

Also the Black line in the Center Pane, CGTS Pre-Basic, is a very useful indicator to keep your eye on. When it tops out, and falls -- always ahead of the price itself -- one should become cautious.

The Dow Jones Index in 1929 hit the 'no pulse zone' in September, and had a horrible fall -- Black October. Note the pulse coming back after the decline. A small pulse is better than no pulse. But a strong pulse, one that carries the red line up toward the top of the blue box is even better.

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This looks like a temporary setback for the Dow. The pulse comes back quickly; and the index is soon again making higher highs and higher lows (Second Pane). However, the pulse soon weakens again; and then disappears. In January 1931, the pulse vanishes again; and then stays gone longer. Our CGTS Indicator (black line, Center Panel) does recover and begin climbing. The pulse follows it up for a time; but then both indicators top out again.

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In 1932, the same story holds: no pulse, with frantic selling; then an attempted recovery, with a stronger pulse; followed by another vanishing pulse.

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It is interesting that the pulse did not vanish in this way in the 1987 Crash. The 1987 Crash was a fluke. It came near the beginning of a Business Cycle Expansion (1983-2001), so it was swept away by the force of the natural inflation of the economy. But the Great Depression and the Dow Jones collapse came at the very end of a Business Cycle Expansion (or Inflation -- Expansion IS Inflation), which had run from 1911-1929. The market was 'out of energy', and was experiencing entropy -- the energy in the system was leading to increased dis-organization and chaos.

Today, our expansion ended in 2001 (1983-2001) -- and we have been struggling with an entropic system every sense. Cheap money has propped up asset prices, but it has not defeated entropy; and it will not. The only thing that 'defeats entropy' is time. Entropy comes into a system when the energy quotient flips from creative to destructive (it is very much like sap feeding the life of the tree during the growing season -- this is anti-entropy, where the energy leads to greater forms of organization in the system -- and the sap declining back into the root system when the Business Cycle ends, to protect the root-system -- this is entropy).

Here is the 1987 chart. There is a slight period of no pulse, followed by a massive implosion of prices. But the index quickly bounces back with rapid increase in pulse and rapid recovery.

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Here is today's DJIA. Note the lack of a pulse today. Note also that the Second Pane showing the indicator that measures Higher Highs and Higher Lows has turned negative also

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So what is this telling us about today? The pulse -- the rising sap -- tells us which issues are vital, awake or alive.

We run a report every day to see which issues have the strongest pulse. Here is today's report -- the top pulses by number. There are a few themes here. The anti-gold ETFs are very strong, as one would expect; Japan Indexes are strong; Japan currency issues are weak. If fact, if you were long all the issues on this list, you would be in excellent shape investment-wise.

Note also that the VIX -- the CRB Volatility Index -- is alive. This is generally a negative for stocks.

Also note the low-priced gold stock LODE appears on this list. This makes me wonder if the second- and third-tier gold stocks (the cats and dogs) might recover ahead of the more established mining stocks.

I am not bullish on gold yet. My theory is that stocks fall from 2001-2019 and gold rises from 2001-2019; so I am an interested part in this central-bank inspired attempt to murder gold before out very eyes. I think it will fail. But my adversaries are very smart, and very tricky; I believe they are not wise, since they refuse to follow the laws of nature and go-with the natural law of 18-years of Inflation of assets followed by 18-years of deflation of assets. This is for the good of the world, for the balance of prices, and for the balance of wealth between the rich and the poor. Current fed policy is anti-poor, anti-old, and anti-everyone but the very richest people in the world. It will come to a great tragedy.

We can show you the issues with the strongest pulse, but not those with the weakest pulse, since zero is zero. We do have another reverse indicator that we call SELLING PULSE. Those issues giving a Selling Pulse reading below zero show up on our Most Negative List.

Note all the gold stocks, the industrial materials stocks -- commodity stocks -- and global shipping.

Here is a list of every index (and a couple of stocks) we follow that gave a Buying Pulse reading of zero today.

Also, I have begun to keep a record as to % Bullish in the market based on the Pulse Indicator. I do not have enough data to share with you about the accuracy of this indicator as a trading signal -- our Pulse Indicator is fairly new.

But today's reading is that 45% of the market is above zero. That is, the market is 55% bearish.

Here are the indexes we follow that gave a bearish 'No Pulse' reading today, with a few stocks we are following thrown in.

Can't this pulse reading change quickly? Yes, it can.

Let's look at pictures of the indexes I follow to get a sense of what they look like in terms of pulse.

The S&P 500 Index (GSPC). We show the current picture, and a picture in 2008, before the Global Market Collapse.

Today the GSPC has no pulse.

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In 2008, the GSPC ran out of pulse; and then the market collapsed.

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The Australian AORD does have a tiny pulse. But it is not much of a pulse. Note the CGTS indicator (black line, Middle Pane) is still trending lower.

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The Bank Index (BKX) has rallied back this past week -- but it's pulse is gone.

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The Bovespa is decidedly negative; and has been so since September 2012.

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The Dow Jones Transportation stocks are clearly faltering. The recent bounce-back rally notwithstanding. The Light Brown Line in the Central Pane (our M2F ALT indicator) is a momentum indicator showing the current rally has taken the Dow Jones Transportation stocks to an oversold condition (100); oversold is at zero. The Orange Lines in the Central Pane are the short- and the intermediate-trends; both are generating negative patterns.

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We finally get to an index that is positive. DRG, the Pharmaceutical Index, does have a pulse, and 'has had a pulse' since it first began climbing in November 2012. You will notice that every selling point is accompanied by a lack of pulse. The lack of a pulse is not, in an of itself, a reason for alarm. Each stock has periodical pullbacks; this is normal and healthy; what is not 'normal and healthy' is when a rally following a normal pullback does not generate a rising pulse. This is a time for concern.

Also, remember, the CGTS indicator (black line, central panel) has a very distinctive uptrend pattern when a rally is in process (shown above nicely); it then begins to breakdown very noticeably when a period of selling approaches.

I'm not showing individual stocks today: but BMY, Bristol Meyers, had a very noticeable collapse of CGTS over the last few days; and its pulse disappeared.

The CGTS indicator in the DRG chart appears to be at the beginning of a possible breakdown. This needs watching.

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FCHI, the French Index, has had a joyous rally from a very negative chart pattern on absolutely no pulse. What does this mean? The pulse indicator is NOT connected with volume. One might argue this has been a rally on low volume, which may be true. But this pulse indicator ignores volume. What it does suggest is that the selling is not over.

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The FTSE Index, Great Britain's stock index, is very similar to the French Index chart: a nice rally with no pulse and continued down-trending of the CGTS indicator.

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The German Index, GDAXI, is almost exactly the same as the other two charts. The Brown Line (M2F ALT) suggests the bounce-back rally should end or has already ended (is overbought) and the next decline will determine if we are going lower. If the CGTS indicator (black line, central pane) makes a new low, then we will go lower.

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What about housing? Housing stocks have been impervious to pullback. But the rally in HGX has reached overbought levels with a rally having no pulse. It should go lower. Of course, betting against a market that is being fueled by Ben Bernanke with direct infusions is difficult and dangerous. But I ask again: where is the pulse?

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The next index HAS a pulse. Note the very obvious pulse in the Japanese Index, the Nikkei.

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We follow this picture with a picture of an index that very definitely has had a very small pulse for some time: HUI, Gold Stock Index. The HUI has had no pulse (or, at best, a tiny pulse) all through this massive decline in Gold Stocks. This shows how this Pulse Indicator can presage a major decline.

We expect Gold Stocks to begin to bottom. Note the uptick in our long-term T11 Sunmarry indicator in Pane Four. This suggests the real beginnings of a bottoming process; but we are not buying gold stocks yet.

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Japan's indexes are soaring. But China's are not. The Shanghai Index (SSEC) has shown an utter lack of a pulse for the last six weeks; and its CGTS (black line, central pane) is heading lower.

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Japan has been up, China down; and South Korean stocks have also been suffering from a diminished pulse. And continue to do so.

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The NDX, Nasdaq Index, has been struggling. Apple Computer has kept it down. It has battled to gain back territory. We have been short Apple for many months. We are still short Apple. The NDX is overbought and has pushed higher with almost no pulse for the last two months. We think CGTS will lead the NDX lower over the next few weeks.

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What about small-cap stocks. The RUT is very much like the other indexes we've been viewing: struggling back after a sell-off; but no pulse. Meaning lower prices are almost guaranteed. Note below in the Central Pane I put in a downtrend line on the CGTS indicator, indicating where I think the index is heading.

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Semiconductor stocks? The SOX did generate a bit more pulse than most other indexes when it rallied this week. But it still looks dismal, when compared with real rallies in the chart. It is overbought now, and should go lower -- unless Bernanke unleashes a new round of purchases of index futures to make sure the indexes go up.

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Both the ten-year and the thirty-year TBonds have been rallying, as shown by the two ETF's that measure appreciation of yield, TNX and TYA. These declining ETF's, suggest, perhaps, more money leaving stocks and moving back into bonds. Interest rates are going lower. This suggests the global economy is not fixed by all the money-spending of the central banks; and global depression will continue.

Also, the other index doing well in terms of appreciation 'with a pulse' is the UTY, the Utility Index, suggesting the same: yield is still attractive. Note in the UTY chart how a declining CGTS Indicator pivots at its bottom and reverses back up to lead the Index on a long climb up the ladder of appreciation, begun in December 2012, and still continuing.

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Ok; here's a picture of the VIX. This issue describes the amount of volatility in the markets -- that is, the anti-stock volatility -- the selling energy. The VIX seems to be waking up.

It is almost impossible to trade the VIX, with its short rapid movements up and down. But its 'liveliness' is a warning to those complacent about stock gains.

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Our last two indexes, the XCI, the Computer Index, and the XOI, Oil and Gas Index, are both showing a paucity of pulse. The XCI's decline began last October, when Apple Computer started to come down. It is quite likely it will continue until Apple really bottoms and begins rising. But many computer companies have come down, based on weaker sales in a weakening global marketplace: IBM has tanked; DELL is getting ready to tank (after a buyout offer fell through); EMC is in a long decline; HPQ is attempting to resist the coming decline; QCOM is beginning its descent.

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XOI looks ready for another leg of decline. It is overbought; overbought on no pulse. And CGTS looks to be heading lower.

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Here's a few bonus charts for those who made it through the entire report: Apple Computer; and some Chinese banks we've been following. When will Apple bottom? Nobody knows. It is going lower, based on its lack of pulse. It is overbought in terms of M2F ALT (brown line, central pane). It has not bottomed. And there is a chance it could go as low as 366 or even 360 before testing support there.

At least Apple has shown a pulse during its most recent rallies in attempts to bottom.

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We have been following the Chinese banks lately, having called their demise about a month ago. They all had a huge jump on Friday, creating an upside gap.

The strangest chart I have seen, in terms of our PULSE INDICATOR, is the Agricultural Bank of China (1288. HK). Note the absolutely 'dead pulse' since late February. The gap-up on Friday did nudge the CGTS indicator up, suggesting a bottom. But the other bank stocks look even worse than this one.

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The Bank of China (3988.HK) also looks bad; and the CGTS looks even more likely to continue down.

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The HSI, Hang-Seng, Hong Kong Index, shows a series of up-gap islands during this decline, that all closed as prices headed lower. It also has shown as absolute lack of a pulse over the last two months.

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What am I saying by all of the 'pulse nonsense'? I am suggesting that the buyers are played out, that prices are overbought, and that we need a real sell-off in order to make stocks attractive again. This rally has been a fake rally, purchased by artificial interest rates, massive margin-buying (more debt) and fueled also by corporate buy-backs...which are all a part of the Bernanke Doctrine of feed the super-rich and starve everyone else. It is shameful Barack Obama has bone along with this. This will tarnish the reputation of his presidency in a way that Bill Clinton's sell-out to the Wall Street banks tarnished his presidency (much more than Monica Lewinsky and the cigar incident, and the perjury that followed). Clinton essentially betrayed America's democracy to the rich corporate establishment, leaving America without a political conscience -- leaving Goldman Sachs owning all the political power in America. Who was left to speak for the average non-rich American, now that the Democratic Party had sold its soul to the devil?

Clearly, in my mind today, the Devil lives on Wall Street. A very interesting movie that develops this idea is The Devil's Apprentice, starring America's greatest actor, Al Picino. If you have not seen this movie, please see it.

Margin levels are approaching levels last seen (historic highs) in 2009, before the Market Crash. Bank of America analyst, Mary Ann Bartels writes that her margin-based market indicator, based on margin vs. cash levels in margin accounts has given the first market sell signal since 2010. She writes:

Net Free Credits from the NYSE Margin Debt data shown in the chart below is essentially a measure of cash levels in margin accounts. Current levels have fallen to levels that have generated a tactical sell signal based on a 2-standard deviation Z-Score reading.

The last time a sell signal was generated was on April 2010 and the S&P 500 subsequently corrected by 16% in two months. Net free credits for January were at a negative $77.2 million or cash balances are negative and the Z-Score indicates the cash draw down has been excessive. So a contrarian sell signal is given.

Cash balances are plotted as black bars on the bottom graph in the chart below (click to enlarge).

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www.businessinsider.com/first-margin-deb...-3

The pictures below show the correspondence between margin-debt and stock price appreciation; and historical margin levels (those who say we are deleveraging should look at this chart and the student loan debt increase picture before claiming we are winding down our debt -- it might also be nice to look at government indebtedness as well -- along with unfunded liabilities. Look how all three stock bubbles of this past twelve years coincide with debt-bubbles in margin also: 2001, 2008, 2013.

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Look how stock margin-debt was not a problem until the last inflation cycle sponsored by FED mania for debt -- for enslaving the public with debt.

This picture of margin-debt is just another picture of the debt-inflation bubble engineered by Greenspan and Bernanke, which has endangered the life of the American Democracy.

Corporate buy-backs cannot occur except because of artificially low interest rates. So Ben Bernanke has chosen to feed money to the corporations and take money from the mouths of the retired Americans who need safe yield in their investments -- he has made a choice for the rich and against the poor and elderly in America. Nothing could be clearer.

The income gap between the very rich and everyone else has more than tripled since Alan Greenspan came to power at the Fed.

America's soul is on trial. And so far the trial is not going very well for America.

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I realize not all my readers share my political bias. I am conservative fiscally and liberal in terms of social policy -- in the 1960's we had liberal Republicans who filled this role: Nelson Rockefeller and George Romney, to name a couple.

The times are going to radicalize all of us.

One last bonus chart, to show you how the PULSE INDICATOR can tell an investor what to buy and how long to stay in a stock. The Number 1 issue on our list (above) was DUST, which is an Inverse ETF that is short gold stocks. Let's look at a picture of DUST with a special emphasis on the indicators we have discussed in this epistle.

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Michael J. Clark, CGTS

Hanoi

cgts@mindspring.com

HAL LOOKS VULNERABLE TO A PULLBACK HERE.

I am running this chart for a friend. HAL, Haliburton, posted excellent earnings and rallied two days ago. But will the rally have feet? I'm not sure.

In the First Pane of the chart we see Buyers/Sellers struggling, and sellers winning at the minute: the Green Line (buyers) are weakening; the Red Line (sellers) are immovable. And the BLUE LINE (the rope in this tug of war) is down. As the Green Line falls, the sellers gain the advantage.

Second Pane: M2F Alt: short-term momentum. HAL is approaching overbought short-term.

Pane Three: short- and intermediate-term trends. Both are trending down, making lower lows and lower highs. This is bearish short-term. And the brown line is the Moving Average of the longer trend and it is hanging out over the precipice.

Pane Four: price bars plus a black line that is our CGTS main indicator, and the red line which is that indicator's moving average. Everything here is trending down.

Pane Five shows my three best intermediate-term momentum indicators all embedded in the same pane, one blue, one orange, and one brown. All are negative.

Panes Six and Seven shows in graphic form if the two moving averages above are declining or rising. The Green line in the Moving Average of the CGTS indicator in Pane 4 (black line): it is declining. The brown line in Pane Seven shows whether the moving average of the intermediate term trend in Pane Two is up or down. The last pane is merely a repetition of the blue line from Pane One, showing the winner of the struggle between Buyers and Sellers.

We've developed a very simple trading system that trades the two indicators (M5D% Trend Sum, bottom pane and T11Sunmarry, one of our intermediate indicators in Pane 5. Here is a picture of it, very simple:

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This system goes long when the M5D indicator (brown line) is negative and hits -1 and the T11Summary indicator (black line) is postive at +10. We short when the reverse is true: M5D is up at +1 and T11 Sunmarry is negative at -10. We cover when T11 Sunmarry reverses.

This shows we are negative now trading HAL also.

Everybody is talking about Apple Computer. What do our charts say? Pane 1, Buyers vs. Sellers = Sellers still on top.

Pane 2: Short-term oversold. This suggests an attempt at a rally here. But Pane 1 says Sellers are still stronger than Buyers.

Pane 3. Key Intermediate Term Trend has been making lower highs and lower lows since Apple first began dropping -- and still is. No bottom in Apple yet.

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Pane Four shows the price bars and Indicators that all want to reverse. Typically, when the green line crosses the black line it begins a rally. Not so far however.

Pane Five: T11 Sunmarry: still negative.

Pane Six: CGTS Pre-basic 50: has been negative since Apple collapsed, no tick up. Still negative.

The bottom three panes show indicators that have been ticking up, and want to announce a bottom. But no bottom yet.

WE NEED TO SEE THE PANE 3 TREND PUT IN A HIGHER BOTTOM AND THEN BREAK RESISTANCE ON THE WAY UP. So, still negative on Apple. Expecting to see a test of 363 on the way down.

Stocks are funny. They do what they want to do -- and then we try to rationalize them.

Good luck trading.

Michael J. Clark, CGTS

Hanoi

cgts@mindspring.com

IS THIS THE BEGINNING OF THE BIG ONE?

Michael J Clark

One has to be cautious when predicting a collapse of stock prices. There are millions of fundamental reasons this stock rally should be ending. There is one fundamental/technical reason we should be utterly cautious in predicting this. There is a man in the central bank (the most powerful man in the world today, perhaps) whose historical reputation relies on stock prices (the so-called 'wealth effect') going up. He has spent $4 trillion dollars so far to keep stocks appreciating; and to try to keep the banks insolvency invisible based on levitating asset prices.

But there is finally infighting on the Fed Board, disagreement, a lack of consensus -- nothing roils a bureaucrat like a lack of consensus, which is a form of disloyalty. Several weeks ago a committee of bankers and researchers chaired by ex-Fed member Frederick Mishkin released a report -- Mishkin has been described at Benanke's shadow, his alter-ego -- suggesting that QE would be endangered by rising interest rates as early as 2013, which might wipe out the entire Fed Balance Sheet some time in 2014.

[Mishkin,] agreeing with the findings of a recent Fed staff paper, the report warns that "under some conditions, the Fed could suffer substantial net income losses as it exits its current extraordinarily accommodative policy stance in the years to come" - negating the Fed's substantial contributions to the federal budget.

"Given such concerns in what remains a remarkably calm fiscal environment (given near record-low Treasury yields), how much worse could the picture become if sovereign debt concerns heat up?" Mishkin and Co. ask. "And to what degree could U.S. monetary policy be constrained as a result?"

The Fed's net income could even turn negative and losses could exceed its capital, they warn. Then, not only would the Fed be unable to pay the Treasury, it would be unable to pay interest on reserves and meet other obligations in the normal way.

mninews.marketnews.com/index.php/ex-feds...-2

In other words, the Fed could 'fail' -- and could need a bailout from the US Treasury. This would be politically consequential, with more public money being shoveled over to bankers.

Recent Fed minutes reveal resistance to Bernanke's continued QE policies; Richmond Fed President Jeffrey Lacker said this week that if he were a dictator he would end QE this week.

What all this indicates is that there is growing doubt about Bernanke's policies. The economy is stuck in neutral or worse; the global economy is sinking; and attempts to build bubbles in housing and in stocks do not seem to be spilling over significantly into the real world economy. The rich get richer; the poor get poorer. Europe seems to be sliding into a political pressure-cooker that might result in extremist political parties taking over in Italy, Spain, and even in Germany. In response to this, EU enthusiasts have come up with a plan to fund future bailouts by just siphoning customer deposits directly to the banks.

Is this the end of the world as we know it? It seems to be.

So, this article is about stocks breaking down. Also, with the caveat, that Ben Bernanke has a big safety net he has been very willing to use in the past four years to keep stocks from cratering. In fact, there is plenty of information that Fed chairs Greenspan and Bernanke have been willing to spend Fed money to support stocks since the 1987 crash -- and have been doing so ever since. In other words, trying to 'fix' the markets. Yes; that is the issue here. Are the markets 'fixed' not to go down? Essentially Bernanke has told the world that they can safely invest in US stocks because he will fix-it so they don't go down. QE is his policy of 'fixing' stocks, commodities, US housing prices, so that they don't go down. Is it working? Is this intent infallible?

Well, commodities have been going down for months now.

He has managed to prop up housing prices by essentially helping to buy all the bad mortgages on the market, since another drop in housing prices (which I think is inevitable) will destroy US banks.

What about stocks?

One of my favorite writers on Seeking Alpha, Gary A. writes that QE is designed to fuel the derivatives market with 'clean collateral' and keep all the banks from becoming, at once, from becoming Lehman Brothers. Gary A. writes:

The Federal Reserve Bank is in a very serious box as it pertains to the current financial system. The banks need profits or their creditworthiness becomes suspect. They can only profit if they lend based on the sound collateral found on their balance sheets. The most sound collateral is liquid, AAA-rated treasury bonds that continue to keep their value, as yields decline or stay very low.

As it turns out, the Fed is necessary in creating that collateral through QE. The Fed swaps treasuries from their balance sheet, to banks who use it to fund traders in commodities and stocks, for the bad collateral that cannot be traded by the banks. There is no market for the bad collateral. Also, some of the bad collateral is mortgage backed securities for which there is no market. So, QE is instrumental in infusing banks with good collateral, which is used to fund traders.

However, there is a big problem. The Fed, in sustaining QE, is buying all the good, long-term collateral up itself. The Fed issues short term bills, up to 10-year notes, and buys long-term bonds. There is more demand for long term bonds than there are bonds because the Fed is buying them up. Not only do banks need these bonds, but so do pension funds and insurance companies. They have been forced to take on bad bank collateral in deals that will help the banks get good collateral, but put the insurance companies and pension funds under pressure as they hold bad paper. The pension funds and banks would prefer to buy quality paper but there is no return there, so they are forced to take unacceptable risk on opaque collateral that cannot be valued.

In a deflationary environment, which we are looking at, long-term bonds could go higher in value with lower yields. The treasury market is being held up in value, according to Zero Hedge, because there is a shortage of quality treasuries the world over for the $700 trillion derivatives market. As more derivatives go toward clearinghouses from direct swaps that proved suspect in the last credit crisis, more collateral is needed. The clearinghouses must have quality debt on their books that can be seized for losses....

Bernanke is trying to keep the $700 TRILLION derivatives market (leverage 50-1 or even as high as 300-1) from imploding. So says Gary A.

Forbes Magazine in January 2013 published an article by Steve Denning, "Big Banks and Derivatives: Why Another Financial Crash is Inevitable", which highlighted similar issues about the derivatives market bubble.

www.forbes.com/sites/stevedenning/2013/0.../

Gary A. published another article on Seeking Alpha, titled "Ben Bernanke Proved Today That He is a Common Criminal". This is also excellent reading.

seekingalpha.com/instablog/166473-gary-a...-criminal

Getting back to our point: are US stock crashing? We published an article earlier in April about the crash in China, Asian shares (non-Japan) and in commodity stocks. This continues. Now the more normal household name stocks are joining the party. Earnings are deteriorating right across the board. IBM tanked after an earnings miss; EBay; United Health; Bank of America; Goldman Sachs; MacDonalds; JC Penney is apparently heading toward bankruptcy. General Electric posted weak earnings, and tanked; and is now, today, downgraded by JP Morgan. We did not run a chart today on GE as one of our shorts; but we like GE as a short. Caterpillar today reported weaker sales, and lowered expectations for the next year

Bottom-up operating earnings per share for the S&P 500 are withering.

Last week was rough on stocks, with selling in gold setting off a negative reaction that swept through the markets. Ordinarily I would claim this is the beginning of a major sell-off. But I remember Ben Bernanke lurking in the background, not as powerful as before, but dangerous nontheless -- dangerous to short positions. I did buy puts last week, on several issues I will show now.

Reading these charts: I understand they are cluttered with information.

PANE 1 (TOP): BUYER SELLER STRUGGLE DIALOGUE: Green line are buyers; red line are sellers; blue line is the result of their struggle. When the green line is at the top of the chart, buyers are winning; when the red line is up from the bottom of the chart, buyers are stronger; when the green line is falling, and when the red line falls back to the bottom, seller are winning. When the blue line is up, buyers are winning; when the blue line is down, sellers are winning.

PANE 2: TRENDS. Red line is the short-term trend; blue line is the intermediate term trend. The brown line is a moving average of the intermediate trend. It matters if the trend is moving up or down but it also matters in the trends of the trends are making higher highs and higher lows (bullish) or lower lows and lower highs (bearish). When the moving average appears above and outside the falling trend-lines, this is a warning of coming losses.

PANE 3: These are merely secondary pictures of the trends in PANE 2. Red is a negative downturn; green is a positive upturn.

PANE 4: Price in green. Bolinger Bands included. CGTS Indicator in black. This is a leading indicator of where the price may go. This indicator tends to ride up above the price and the Bolinger Bands during an advance; and then drop in advance of a decline. The red line is a moving average of the CGTS Indicator.

PANE 5, 6 and 7. These are the best intermediate term indicators we have: T11 Sunmarry; CGTS PB 50; and BB MJC Sum Trend. When these all three are down, we expect price declines.

Please remember, markets are in flux and can change quickly. This has been especially true from 2009 on, with massive manipulation of markets by central banks, that continues today

Chicago Bridge and Iron is a negative picture at this moment.

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FLR, Fluor Corp is negative.

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GS, Goldman Sachs, is negative.

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JPM, JP Morgan, is negative.

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GVA, Granite Construction, is negative.

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NFLX, Netflix, is negative.

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JEC, Jacobs Engineering, is negative.

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TTI, Tetra Technologies, is negative.

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We all know that France is in trouble. The FCHI Index is also negative.

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The German DAX index is negative. Note: neither of these indexes have seen the T11 Sunmarry indicator go negative. It is almost always the last to change direction.

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I'm showing HUI, the Gold Stock Index, to show how low an index can go after turning negative.

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ETFs that are supposed to shadow US indexes are looking scary also. The IYJ, which is supposed to replicate the Dow Jones Industrials, is negative.

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IYT, the Dow Jones Transportation Index replicate, is also negative, although the two longer term indicators at the bottom panes, T11 Sunmarry and CGTS PB 50, have not yet turned negative.

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IYW, US Technology ETF, is negative.

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What about housing? The HGX, Housing Index, is also negative. As is CUT, the Lumber ETF, a play on the US housing market.

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As I have written, these markets can change fast, especially when one shorts stocks against the Federal Reserve Bank whirlwind. The XOI, Oil and Gas Index, shows how quickly a trend can reverse. Note how we use the Trends resistance and support levels -- that is the support level in this instance -- as a potential buy signal. This is insurance against the Bernanke put.

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A few more stock we like (or don't like), depending on your perspective. HAL, Haliburton; QCOM, Qualcom; and CTSH, Cognizant Tech Solutions.

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How confident am I in these calls? Without the Bernanke put, I would be very confident. However, I realize we are living in desperate times. Our leaders are desperate to preserve the status quo; and they are willing to steal all the money in the world from taxpayers and bank depositors to save the status quo. So I am taking these short positions with a healthy dose of trepidation.

They say 'SELL IN MAY AND GO AWAY'. I'm saying: 'SHORT IN APRIL, BUT WATCH YOUR POSITIONS VERY CLOSELY'.

Best trading to all. And to all a good night.

Michael J. Clark, CGTS

Hanoi

cgts@ mindspring.com