Doug Kass: Next S&P Move Likely 4-5% Lower

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Doug Kass: Next S&P Move Likely 4-5% Lower
           

Famed for his market timing, Doug Kass had been relatively bullish on the market. But he’s not anymore.

In a live interview, Kass tells us that he’s now holding his largest net short position of the year.

Doug Kass, who is president of Seabreeze Partners and a CNBC Contributor believes the next big move is lower.

Part of his thesis stems from all the euphoria that’s currently in the market. The S&P is up 8.3 percent for the year and more than 20 percent from October lows.

“There are good advances and bad advances – this one is bad,” he says.

Kass explains that, “on each leg higher we’re seeing volume decline as prices rise –we’re seeing substantially lower new highs – the advance is becoming more selective and it’s maturing.”

Also Kass doesn’t like that the transport index [.TRAN  5125.17    -38.01  (-0.74%)   ] is lagging and that financials [XLF  14.585    -0.19  (-1.29%)   ] closed badly – both are bearish signs.

And he says, “It rarely pays to buy stock when 85% of the S&P trades above its 50-day moving average as is the case today.”

Conversely, Kass says according to his research only 3% of the S&P 100 are oversold.

Kass has seen these kinds of signals before and if history is any indication, a sell-off is coming. “This has happened 5 times since 2004 – and on average the market has dropped 4-5%,” he says.

Fast trader Guy Adami agrees.

“The onus is on the bulls to ratchet the market through 1360 (a level of technical resistance) – but it doesn’t seem like that’s happening. I don’t think the world is ending but considering the market weakness, I think it’s reasonable to think the S&P trades down to 1325 or even 1275.”