Kass: My 'Fast Money' Recap

This commentary originally appeared at 8:11 a.m. EST on Feb. 23 on Real Money Pro.

In my segment last night on "Fast Money," I explained why the technical and fundamental signs had me moving into a net short position earlier this week.

Along with Melissa Lee was Guy Adami, Karen Finerman, Pete Najarian and Ron Insana.

Let's go directly to the tape of the segment.

I started by expressing that there was a lot of optimism eight weeks ago on my last appearance on "Fast Money" when I was of the view that the S&P 500 Index could approach its 2007 high sometime in the second half of this year.

At the time, my view was an outlier. Less so now. Much less so.

A lot has occurred since then, including an 8% rise in the S&P -- unfortunately, to me, the near-term reward-to-risk has turned unfavorable, but my concerns run far deeper than just the fact that stocks have risen smartly.

I then broke down my concerns into the technical and the fundamental.

The Technical

First, back in December investor sentiment was sour. There has been a huge change coincident with rising prices, as sideline retail cash has come in and hedge funds have expanded their net long exposures. It rarely pays to buy stocks when 85% of the S&P 500 trades above its 50-day moving average, as is the case today. Taking the opposite tack, only 3% of the S&P 100 stocks are oversold, using 14-day stochastics. Since 2004, the five prior times this happened, the market has had, on average, a drop of 4% to 5%.

Second, in a sharply advancing market (such as we have witnessed), we must be alert to divergences. There are good advances, and there are bad advances. And I see divergences aplenty. I see this as a bad advance, as it has been accompanied by a lower number of new highs, and I took issue with something that Joe "JJ" Kinahan said the previous evening on "Fast Money" -- namely, that we are seeing, on each leg higher in stock prices, volume declining as prices rise.