I simply could not resist revisiting the "fear" theme I have dabbled in the past few months. April featured some of the ugliest selling we have seen yet during this bear rally. The market has performed so poorly this year, especially for tech, that it makes you question whether there really is a rally going on anymore. The fear became so thick in April that by the end of the month it felt as if someone (or people) were panicking, anxious to get out at any price. Mind you, we are not yet talking about a crash, but if you were hanging around certain trading pits, I bet you had to wonder whether some big fishies were liquidating major positions.

The stocks hit worst were some of the same highflyers that were doubling and tripling and more in one day or less. Many of these stocks are actually right back where they started before the stupid and often baseless hype hit their desks. Seeing how many of these stocks are even BELOW pre-hype levels tells me that the selling has got to be reaching a crescendo. One indicator that I follow from time-to-time is at an amazing extreme: the percentage of stocks that are above the 40-day (price) moving average (40DMA) has hit 27% - a level we have not seen since the bear rally officially began in March of last year. For some perspective, the up-trend in this indicator was decisively broken in early March of this year, revisited briefly in early April, and has since completely collapsed to the low levels we see today. This kind of faded recovery behavior is typical when a strong up-trend is first broken.

Anyway, my main point is that although the market seems like it is in an overall mode of churn and burn, the fear in the market is getting thicker. In April we saw all the fears collide at once and overwhelm any attempt to be positive about anything. Stocks with good earnings were sold and even supposedly defensive stocks provided little to no solace. Stocks like Motorola that soared on great reports have already sharply corrected to start filling the gaps created by the initial elation. One looks out over the landscape and is hard-pressed to see what positive catalysts remain out there to propel stocks sustainably higher. In the coming week or so, we should expect a strong rebound from all this recent negativity, but, once again, it will be a rally that should be sold not bought.

At some point, the market will be finished pricing in slower earnings growth, higher interest rates, slower growth in China from higher rates there (a NEW fear!), greater instability in the geo-political scene, and U.S. election uncertainty, but it will be at a price substantially lower than where we are now. And when we get there, the outlook may still offer little reason to trust your hard-earned dollars to Mr. Market. Be prepared and be careful out there!