Why are market insiders so worried?

Though stocks have been hitting new highs, something was bound to spook investors -- and that something was a downed Malaysian jet.

By InvestorPlace Jul 17, 2014 4:54PM
Caption: A trader works on the floor of the New York Stock Exchange
Credit: © Justin Lane /epa/CorbisBy Anthony Mirhaydari

It was all going so well. Federal Reserve chair Janet Yellen was in front of Congress this week brandishing her dovish tendencies. Large-cap stocks are pushing to new highs. CNBC was attacking the skeptics on air with great vitriol. All was right in the world.


But all changed on Thursday after a Russian surface-to-air missile streaked through the East Ukrainian sky and, in a flash, ended nearly 300 lives at 30,000 feet when it brought down a Malaysian 777 airline bound for Kuala Lumpur.


Both Kiev and the pro-Russian separatists are blaming each other, but it's clear that this is going to escalate the situation -- especially in the wake of Wednesday's new U.S. economic sanctions against Russia.


But the bigger story is that this confirms the apprehension I noticed deep within the market earlier this week. Insiders didn't know what, exactly, was going to spook the market . . . only that things had gone too far.


Breadth signals were sending warning signs. Jason Goepfert at SentimenTrader notes that with large cap indices near new highs, underlying breadth momentum has been badly lagging and is at one of its worst readings in more than 60 years.


Not convinced? Here are just a few of the ways you can see the problems with breadth momentum:


The Nasdaq 100 closed at a new high with net negative breadth on Wednesday: Up issues accounted for only 42 percent of the total. Of the 21 other times this has happened, the Nasdaq 100 was higher two days later only 38 percent of the time.






















The Russell 2000 was struggling to stay above its 50-day moving average -- a level it last lost in a meaningful way back during the March/April momentum/biotech pullback -- which it lost in dramatic fashion on Thursday. Now, the Russell threatens its 200-day average.


A breakdown here would be bad news because, aside from a quick test below back in April and May, the Russell 2000 has remained above this level since this Fed-fueled stock market meltup started in 2012.


ibb biotech


You can also see the breadth concerns in the way biotechnology stocks are coming under pressure again, with the Biotech iShares (IBB) down another 2.3 percent as I write this Thursday.


The fund is now nearing its 50-day moving average again for the first time since March. In response, I've recommended my subscribers add short leveraged exposure to the sector by adding an allocation to the ProShares UltraShort Biotech (BIS) -- a position that is up more than 12 percent since added back on July 8.


hyg high yield corporate bond


And the concerns also show up in the way selling pressure is beginning to hit high-yield corporate bonds -- an area of the financial system that has pretty much gone straight up since this time last year, providing a base of support to the stock market by empowering debt-funded share buybacks. But the iShares High Yield (HYG) has closed below its 50-day moving average for the first time since last August and is extending its decline below this key level, today.


It's possible that the bond market is preparing for another "taper tantrum"-like episode -- of the type we saw last spring when Bernanke first broached the topic of rolling back QE3 -- in preparation for the end of QE3 in October.


More from InvestorPlace


Disclosure: Anthony has recommended BIS to his clients.

Anthony Mirhaydari is founder of the Edge and Edge Pro investment advisory newsletters, as well as Mirhaydari Capital Management, a registered investment advisory firm.

Tags: IBB
48Comments
Jul 17, 2014 8:08PM
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Don't forget the billions of rounds of ammunition that Homeland Security has stockpiled around the country. There is a reason for it. The powers that be are fearful. We all should be as well. 
Jul 17, 2014 8:05PM
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Most Americans can care less about the stock market. The majority of Americans wealth is not tied to the DOW or Nasdaq or S&P 500. For most of us our jobs and any real estate we own are the only assets of significance. Personal incomes adjusted for inflation have been on a downward trend for decades. Savings rates remain very low. The American economy can be likened to a house of cards. The slightest wind will topple it. 
Jul 17, 2014 6:30PM
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Anthony Mirhaydari is generally a pessimist and bear.  Most of his articles talk of the impending doom and market falling..... but it hasn't happened.  I know I know... when it finally does fall, then he will be right.  But when?
Jul 18, 2014 8:01AM
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Afraid of history lessons? QUIT DELETING MY POSTS.
By the late 1700's, France had exhausted it's wealth fighting wars on multiple fronts. It's wealth was foolishly spent and it was massively indebted. It's government was infiltrated by Inflationists who favored wealth for a few only. The common person was forced into destitution and literally every aspect of it's economy was false-funded or dead. It had printed so much fake money that there was no value to it. Those who sought the shelter of gold couldn't sell it, the surrounding countries didn't need to pay a fair price due to extreme desperation. Stock-jobbers rigged, controlled, manipulated the stock and bond markets so terribly- that regular people opted out. 
Obtain a copy of: Fiat Money Inflation in France, written by Andrew Dickson White. Included in his education was sitting through lectures given by actual survivors of the French Revolution period in France. White was asked to read his book out loud to members of BOTH parties of Congress in America in the late 1870's when we first faced a national recession. THEY LISTENED... our arrogant losers in government today have repeated history and set us up for an identical failure.
Jul 18, 2014 11:23AM
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When a creative politican learned that encouraging banks to buy stocks with free money would ensure political calm the entire game changed.  Much like the housing crisis ten years ago when politicans urged banks to give everyone who could breathe a mortgage they now encourage banks to use the free money to maintain markets and keep their butts out of the deep doodoo.  So buy on and on as there is very little risk of any kind of correction.
Jul 18, 2014 3:43PM
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In my small Midwestern town, there lived a guy who was deathly afraid of tornados. Every time thunder clouds appeared he was convinced a tornado was imminent. For 40 years he did this. One day a tornado did touch down nearby; we never heard the end of it. "See? I TOLD you."


Moral: Even a blind squirrel finds an acorn once in awhile.

Jul 18, 2014 12:09PM
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Apparently, the market insiders are not too worried.  The market is recovering nicely this morning. So Anthony; if you had waited a few hours, you could have skipped this article. 
Jul 17, 2014 5:58PM
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Maybe it is the GDP numbers?   Maybe the fake jobs numbers (almost all are minimum wage, part time jobs).  Maybe it's the devaluation of the dollar?   The high world price of oil and the high gasoline taxes.  Maybe it's the bloat of big government and the plantation entitlement mentality.  Maybe it is the world situation. 


Or maybe it is just FEAR of Obamanomics?

Jul 18, 2014 8:18AM
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Historic repetition:
- Before succumbing to wars on multiple fronts, the French government used it's assets to pump up inept and administrative business entities in it's stock markets.
- Stock-jobbing was the rage back then, no one in the markets lost money ever, but no one who had to use money to buy food, clothes and shelter could participate (worthless currency).
- The French government had it's own version of Tea Party called- the Inflationists, who believed we were all better off obeying a few rich people than an elected government.
- The Bastille was filled with competent people suppressed by control factors. A farmer could not grow crops and sell them to markets for a profit. The Butcher, Baker and Candlestick Maker could not generate profitable commerce. THEY are who the people freed when they stormed the Bastille (jail) and tore it down with their bare hands.
- Wars were manufactured-- like going after WMDs that weren't there or accusing one group as terrorists, sending in massive troops and equipment then stealing the oil but making the people fight the wars and pay for the cost. Those wars exhausted the nation's assets before real wars over actual things like rights and freedoms were born.
The response- Let them eat cake, was never said, but holds two specific meanings... it could have been an arrogant response laughing at righteous suppression... or more simply... seeing that food was prepared for the wealthy every day- regardless of cost- and thrown away nightly while the citizenry starved. Let them eat the cake we do not.
It's time for REAL CHANGE. I think we are all done. The markets are fully dysfunctional to our nation and people. Our government appears helpless or worthless as an agency of change we can all believe in. No BIG does anyone except the Elitists on top any good. Better to have mass competition than mass termination and war.
Close the banks. End the Federal Reserve. Get RID of Wall Street. If we go to war, send in the financial sector first... they are well-fed, sharp as tacks and slimy as they come.
Jul 18, 2014 8:35AM
Jul 18, 2014 8:22AM
Jul 18, 2014 6:28AM
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There wasnt 10 cents of news yesterday that would make the markets sell off. Those countries have been at war since time begen!!
Jul 18, 2014 8:35AM
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I pledge allegiance to the United States of America, a land that began with the hopes of Freedom, steadily suppressed by the dopes who ruined all the other nations that were once great.
I pledge allegiance to those who fight against organized control, manipulation and suppression by weak-minded sick fools who revel in the plight of the other man for sport.
I pledge allegiance to anyone working day and night for what they know is right in their hearts and souls, rather than attempting to obey laws made by puppet lawmakers who could not EVER as a group- stand up and recite them all, much less obey them.
I pledge allegiance to a nation with a statue in a coastal harbor holding a plaque that reads: Send us your poor, your tired, your huddled masses... but should also read- and we will send you our garbage inheritors who steal jobs, blockade careers, play money games and make paper and button pushing administrative roles more important and lucrative than REAL jobs... do with them what you will, no refunds, exchanges or returns. 
Jul 18, 2014 4:19AM
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"Why are market insiders so worried?"


Maybe they are worried that they will finally be called out for the Manipulations and Corruption. They certainly aren't worried about Money as they have been making tons of it off Crack Dollars while the rest of us Suffer the fallout. Maybe they are worried that the Working Poor and the Fading Middle-Class will start a Revolution. These Market insiders literally brag about how many Jobs can be CUT all in the name of Profit and Greed. Well you know what Greed got the British. This time around it will be far Worse. The Market falling should be the least of their worries.

Jul 18, 2014 8:25AM
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YOUR MASTER IS NOT OMNIPOTENT AND WILL BE BROUGHT BACK DOWN TO EARTH. YOU CAN TAKE AWAY MY JOB, MY HOUSE AND MY FAMILY BUT I WILL ALWAYS BE FREE NO MATTER YOU BELIEVE YOU ARE. YOU ARE NOT FREE, MONEY IS YOUR MASTER AND TODAY, IT IS AND YOU ARE WORTHLESS. 
Jul 18, 2014 11:16AM
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Why are market insiders so worried?

It doesn't look like they are too worried.  Market is already recovering.  If you had waited a few hours, you wouldn't have had anything to write about.
Jul 18, 2014 3:25PM
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You're right Mirage, I totally believe in free speech, exception too much gutter talk...

But it also depends in which context it is used...??

If I were to get deleted a few times, or too many....I would just go back and have discussions and Market give and take...Where I'm loved...yuk, yuk.


I'm pretty much a totally different guy there, and "no one allows" any Political rambling in the discussions; It's NOT WELCOMED...

Unless the article pertains to that subject or inter-connection...

Jul 18, 2014 12:15PM
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Havey...The Butterfly that flapped his/her wings, was the one RESPONSIBLE...


V_L,  Why the hell would anyone "delete your post"..?? Did you call someone at MSN a name or something..?  Or did you double clutch and say the "exact same thing" twice in a 24 hr. period..

I guess I've never seen you do that though...Probably something to do with ABS, aka Barry..?

But it does seem that you have plenty of post' on here today or from yester....


Randy47....It's not EVERYDAY that a Jetliner filled with 300 passengers, gets shot down by some nutballs or idiots....And then the JEWS evade a Country.


The ONLY reason Market insiders are worried, is because Anthony is WORRIED...


Off to the gravel pits to check on some crushed concrete, no time for this...Ciao  

Jul 18, 2014 8:08AM
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Maybe it's, to quote the White House, all the hard work Obama has done to make the world so tranquil.  With nothing going on, and everything so peaceful, they are just bored and over thinking things...
Jul 18, 2014 12:40AM
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Maybe it has to do with a couple of these finding on gold ;)  


"Gold is on its way down. Gold is the new fur coat. No one is wearing it anymore, other than on a ring finger. Even then it's normally plated now."

"Synthetic gold is right around the corner, and most experts will not know the difference without spending $1000's of dollars having it tested. If diamonds can be manufactured, so can gold. Oil is now being synthesis."




"In the late 1960's a nuclear physics engineer was employed at a British shipyard, installing a nuclear power plant, on a Royal navy submarine. The Nuclear reactor developed a minor (non-catastrophic) leak.
For safety reasons ,radiation shields were placed around the reactor. They were sheets of lead on steel frames, that were rolled in, to shield the repair team until the radiation leak could be repaired. The engineer, a designated member of the emergency repair team, noticed after they completed the repair to the leaky reactor, the shields had changed their nature, and several of the shields were unusually discolored. They had been transformed into AU ... Gold!
Pb ... aka Lead, is only three molecule in difference from gold. It turned out later the engineer had researched that if you could knock three specific molecule off of lead, the end product is gold!
Denser and heavier than lead, the only thing that can do that is Radiation.
He had to swear under the official secrets act of Britain, to keep this event secret, and only related the story to his nephew (also a physics engineer), on his death bed, as he died from cancer and brain tumors, in the late 1970's years ago.
The British and U.S. governments removed their currencies from the Gold standard almost immediately (early 1970's), and resorted to a secret Nuclear standard, and tried to prevent others from manufacturing gold.
Make of this what you will! We have had synthetic Diamonds for 30 years, The Russians are drilling Oil from wells that are 25 to 35 thousand feet below sea level. The only oil shortage is said to be in North America, and experts say its only because a shortage of production facilities.

Iran and North Korea have discovered the gold process recently. China is secretly supporting North Korea, in return for a percentage of the produced gold. And Iran is selling theirs on the black market, around the world.

Some say this "new" gold is what's causing the increase in cancer rates among the wealthy, who wear it daily, and others who used it to fill cavities in their teeth.. Fort Knox is filled with this contaminated gold, and a main reason it is shut off from visitors. Buy your gold, but accept the risk."
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