If this is for real, leadership will show up

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. 

After Tuesday's follow through day, we told you we were suspect of a follow through occurring on day 21. But...like a good follower of William O' Neill's discipline, we told you that we still have to give it a chance to work. We are only one day later. After a monstrous drop in the NASDAQ, Tuesday's action was the first action that woke me up since May 11 as I stated the NASDAQ looked like it would lead again. Wednesday's action has me sitting up. Wednesday's volume was much more compelling.

As I have told you for years, the NASDAQ-types lead the market up and down...and it was a positive that the NASDAQ was starting to lead again. I will repeat, I do not know what this will lead to, but accumulative action is now being seen and it must be respected. Keep in mind, the best action has been reserved for names like QCOM, BRCM and others that have been absolutely bludgeoned over the past few months...some down over 50%. While these areas move faster than others, there will be a rebuilding process. I am already receiving too many emails from people who were fearful on Monday but greedy on Wednesday. So...relax! The market will be open today and tomorrow. I promise. If this is for real and long-lasting, leadership will show up, bases will form and more and more stocks will break out on volume. Just play it one day at a time. Here are a few lines out of Investor's Business Daily. It will explain exactly how I feel right now. Please pay attention to the words in italics.

"Technology stocks were a big reason the Nasdaq and smaller stocks rallied. The Philadelphia semiconductor index soared 4.3% as chipmakers finished as one of the day's top industry groups. Transportation stocks also fared well as crude oil futures settled at a nearly one-month low. While those and other areas are leading the market, be judicious in what you buy. Tuesday's Big Picture cautioned that some follow-throughs can go nowhere. Many top-rated stocks are in risky late-stage bases. Avoid deep bases or those with severe selling. Make sure fundamentals are solid. Disciplined trading can keep investors away from distressing situations. If technology is where leaders are emerging, there aren't abundant opportunities so far. Few chip stocks are near buy points. Most of the high-liquidity names are just now coming off lows or still building the right side of their price bases."

Other notes: OIL PRICES feel like they are topping near-term. This is good news but it is slowly becoming bad news for OIL STOCKS. Many OIL STOCKS are acting horrid in here...especially the DRILLERS. Keep in mind, this is a very tough group to play as most charts continue to be wide and loose.

The BOND MARKET has broken out of its low level base. Everyone is talking about more cooperative inflation numbers. I do not believe most government statistics but I do believe in the BOND MARKET'S reaction to them. This continues to be nothing but good news right now.