Why consumer staple stocks look good

Gary Kaltbaum is an investment advisor with over 18 years experience, and a Fox News Channel Business Contributor. Gary is the author of The Investors Edge. Mr. Kaltbaum is also the host of the nationally syndicated radio show "Investors Edge" on over 50 radio stations. Gary is also editor and publisher of "Gary Kaltbaum's Trendwatch"...a weekly and monthly technical analysis research report for the institutional investor. If you would like a free trial to Gary's Daily Market Alerts click here or call 888.484.8220 ext. 1.

Did you hear everyone say there was inflation today? Hey...thanks for the head's up. Readers of this column already have known about what everyone is starting to say about the potential for inflation. We saw the BOND MARKET crack, the DOLLAR sink, COMMODITIES soar...and of course, everything we pay for move higher. But our friends at the Fed as well as those lovely government statistics told us not to worry. Hey guys...join the party. But the market is not dropping because of the supposed inflation...and the markets did not drop because the inflation numbers were higher by .1% more than expected. This drop was and has been in the cards for a while. Markets can do fine with inflation as long as there is strong growth. We believe there is a good chance here that the market is telling us that growth is going to slow...while we get a pick-up in inflation. Now...what is the Fed going to do? By the way, thank you Dr. Greenspan for creating this with your ridiculous easing of money down to almost 0%.

The bear phase, the bear market, the bad market...whatever you want to call it...is now gaining teeth. We do not want to wait for the markets to be down 20% before calling it a bear market. We just want to get out of the way when necessary...and that was late last week. It is now important to separate the short-term (the trees) from the longer-term (the forest).

Shorter-term, anything can happen. Markets are oversold and stretched to the downside...but bear phases change the playing field. Just like overbought can become more overbought in bull phases, the opposite happens in the bear. ALL BOUNCES ARE TO BE SOLD UNTIL OTHERWISE NOTIFIED.

All that was needed to confirm the bear phases was for the S&P and DOW to join the ugly party. That is now occurring. The DOW has now broke the 50 day average. The S&P is acting much worse than the DOW. It actually broke a series of higher stair steps as it broke 1280.


The NASDAQ and NASDAQ 100 (NDX | Quote | Chart | News | PowerRating) were the first to go. They are deeply stretched and deeply oversold. Both are now in bear market territory...sitting underneath their longer-term moving averages. The NASDAQ broke the 2232 level we had you watching as well as the longer-term 200-moving average. The NDX broke...well fuggedaboutit...just a bungee jump in the NDX.

WORLD MARKETS are now being rolled. As we have told you, they have been topping as well . Keep very far away right now as many of these markets are not as liquid as ours.

Our call on the top in COMMODITIES remains in effect. In fact, it is now looking like a strong top has been put in. If this ends up being true, COMMODITIES ended in a classic climax run.

OIL STOCKS, for the most part are done for now. Many are now breaking support as well as moving averages...on heavy volume.

We believe our best call recently was the top in the BROKERS and INVESTMENT MANAGERS. For lack of a better word, they are imploding. We told you they are a good market proxy and could signify a turn to the downside in the market. They sure did.

The BOND MARKET remains in a bear market...enough said.

We have liked the action in the BIG FINANCIALS recently. We believe the pin was pulled yesterday. On a relative basis, they are champs...but think they get caught up also.

The one area seeing money flows here is the CONSUMER STAPLES. This would be quite normal at this juncture in the cycle. How long this lasts? Not a clue. We just know that names like (KO | Quote | Chart | News | PowerRating), (PEP | Quote | Chart | News | PowerRating), (CL | Quote | Chart | News | PowerRating) are in gear as well as many MEDICAL stocks.

Be careful. As we told you recently, the strategists will stay bullish no matter what...the permabulls will stay bullish no matter what...but the market right now is singing a different song. We are amazed as to how many are calling for a bottom here...ALREADY. The cheerleaders are already out in droves. Kids...let's let the market decide.

Gary Kaltbaum