I doubt we've seen the market bottom, here's why

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.

Robert Toll...head honcho of Toll Brothers told analysts "The next great story is pent-up demand. Once the natural balance is restored in the market, you're going to see prices go up again. Prices are going to go up quite a bit." This is the same man who several quarters ago went on bubble vision and told the world that he was going to bury all the short-sellers in the stock. Then, we watched how several weeks later, he sold hundreds of millions of dollars of his own stock. Funny...no one called him on the carpet for his sense of timing. The stock is now down 50% from the highs. We have news for this obvious cheerleader. Existing home inventories have jumped a whopping 58% to a record 3.4 million units. Pent-up demand?

Speaking of short-sellers...securities regulators are investigating whether Vonage's stock (VG | Quote | Chart | News | PowerRating) dropped because of short seller's chicanery. Sure, it had nothing to do with the fact investment bankers brought Vonage public even though the company lost hundreds of millions on approximately $350 million in sales. Sure, it had nothing to do with all the competition from major companies directed at the heart of their business. Sure, it had nothing to do with the fact it was brought out at the top of the market. Yes...blame the short-seller.

The Mets continue to play well. Had to throw that one in.

The first tropical depression is headed for Florida. In fact, close to Central Florida where we reside. Can't come up with any sarcasm for that one. Let's just hope for a quiet season...and please stay away from New Orleans.

Some emails answered:

Was that the climactic reversal that ended the bear phase?

Don't know but doubt it.

Was that the bottom?

Don't know but doubt it.

Was that the low?

Don't know but doubt it.

Was that the bottom?

Don't know but doubt it.

CNBC said the market put in a "v" bottom. Don't you agree?

What is a CNBC and what is a "v" bottom?

Can we start buying again?

Don't know but doubt it.

Was that the bottom?

Don't know but doubt it.

Don't you think what we have seen is just a correction?

Don't know but doubt it.

Was that the bottom?

Don't know but doubt it.

Was that the bottom?

OK...enough, that was the bottom and the DOW is going to 40,000!

We have seen absolutely nothing that changes our stance that a bear market started on May 11. We have no clue as to price and duration and find it folly to try to predict. Unfortunately, just like the last bear market, we suspect we are going to have to make this statement over and over again. We understand Wall Street's always-bullish bias so it is extremely important to ignore the noise and pay strict attention to reality. Too many continue topay attention to the trees (the near-term oversold condition) and not the forest (the overall market condition). If we had a dollar for every email we received in the past couple of days asking if the market had put in a bottom on Thursday...well...let's just say we would not be writing this. It is so amazing how investors try to grab for any lifeboat when the market is in a bearish phase.

After three and half days of brutal selling, the market found a place where it said enough was enough. Please don't think past that. A chart of every major index and every major market around the world evidence this. Keep in mind that bounces are the trees. The forest is that the market as well as markets around the world have made strong tops. Into Thursday, every one of our short-term sentiment gauges were off the charts...in fact, they were off the charts all week...but Thursday's action finally found panic selling. On Thursday, the market reversed to the upside off of a nauseating drop. Volume was monstrous. That was the first day since the drop that we felt panic in the selling. We have taught you for years that upside reversals serve two purposes. First off, they serve to suck out all the panicky sellers at the most inopportune time. We call this a washout or a shakeout on Wall Street. Secondly, it serves to give the market some impetus for upside testing. Only one problem ladies and gents. Until the market confirms that the downtrend is over, we are in a downtrend. Downtrends are different than uptrends. In other words, bear markets are different than bull markets. In bull markets, days like Thursday wipe out all the sellers...embolden the buyers...and the market is off to the races. In bear markets, days like Thursday occur only because the market had dropped too far...too fast. Relief comes in the fact that sellers are tired and shorts start to cover. But in bear markets, these reversals are fleeting. They make you feel good...make you feel emboldened, suck you in...and then bury you soon after. Learn this lesson. Because if this is indeed a bear market of consequence, you are going to see violent rallies...which will all fail miserably. At this juncture, we are going to look for a follow-through day starting on Tuesday. Even if one occurs, keep in mind, the major indices as well as all World Markets are a mess right now. The market will still need time to repair all the damage.

Normally, we would post some charts on this report...but after the past week's action, most look like a 3-year old scribbling with crayon on a pad. We do have some thoughts.

The BOND MARKET continues to bounce. We continue to believe BONDS are in a longer-term bear market...but shorter-term, we continue believe we are going to get upside testing. Just keep in mind that there is a good chance that the first second Big Ben states he is going to pause, the Bond Market will crack once.

GOLD finally broke short-term moving averages. It could not make a stand. GOLD STOCKS continue to under perform the GOLD by a wide margin...which is a negative.

COMMODITY STOCKS have also been cheesed. On Thursday, most reversed higher with the market. But...we believe, at best, this area has weeks of flopping and chopping before it can even begin to start moving up again. At worst, they have started their own bear market and are headed much lower. This includes OIL STOCKS which remain under serious distribution even though OIL PRICES remain above $70.

WORLD MARKETS are imploding. EMERGING MARKETS are on the morphine drip. As we have told you, our best call was when we told you that the most risk is in the EMERGING MARKETS because of their illiquid nature.

Check out this chart that just hit our email box. Our market is a tiptoe through the tulips in comparison to these drops.

You may also putdown Europe and Asia on this list.

ADVANCE/DECLINE as well as UP/DOWN VOLUME figures remain horrid.

There is a clear lack of leadership. We do not believe our favorite sectors, the BIG BANKS, MEDIA, misc. HEALTHCARE, CONSUMER STAPLES and now UTILITIES, will be able to lead the market back into the promise land. Leadership will need to show up.

NEW HIGHS...what NEW HIGHS?

MUTUAL FUND CASH remains near the very low 4%...which was the low at the start of the bear in 2000.

Lastly, we have been asked to explain why this meltdown around the globe has been happening. Ok...we'll take a stab because we think there is a simple explanation. In one sentence: Policy makers around the world are now removing the largest stimulus from the system that we have ever seen...and the markets are now adjusting to them. This at a time where economies around the world have also topped. Do not underestimate this massive change in policy. We are not!