I'm treating this as a bear market until proven otherwise

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.

I am writing this from my hotel room in Honolulu. Sitting on my patio at the Hilton Hawaiian Village, I can see Waikiki beach and Diamondhead. Heading for the Big Island Wednesday and then off to Kauai and Maui. The only thing I can think of right now is what Dudley Moore said in the movie "Arthur." "DOESN'T SUCK!"

Isaiah Thomas taking over coaching duties for Larry Brown. Isn't that like Custer taking over for Napoleon? Isn't that like the flu being replaced by pneumonia? Why do the Knicks like Thomas so much? Woe is me. Can we bring back Red Holzman?

American philanthropy rose to its highest level since the end of the technology boom. The report was just released by the Giving USA foundation. It estimated that in 2005, Americans gave $260.28 billion, a rise of 6.1 percent, which approaches the inflation-adjusted high of $260.53 billion that was reached in 2000. Let me repeat...$260.28 billion. Yes...what a terrible country we live in! If I hear another yutz put down this country, I will heave. Hear that Gwyneth Paltrow?

I actually have some positives to go with all the negatives I have been harping on...but let's start with the negatives.

7...maybe 8 out of 10 stocks are in poor technical shape. Out of the 200 groups I follow, I cannot fill both hands with groups in good technical shape.

Did you see those ENERGY buyouts on Friday? WOW! Wish I owned some (KMG | Quote | Chart | News | PowerRating) or (WGR | Quote | Chart | News | PowerRating). My problem is that everyone who commented on these buyouts said it was a positive. Far be it for me to rain on the parade but haven't we seen these types of buyouts at THE END of cycles? We never seem to get these buyouts in bear markets for a specific sector. No matter what, we will let the action dictate. OILS had been acting poorly in relation to OIL PRICES. All popped in sympathy on the news.

BONDS continue heading south...which means rates on the long end continue their upward trajectory. As I have stated, I am not so sure it is a good thing that rates keep rising. The 10-year yield just moved to a new high.

The latest disturbing action is in the BIG BANKS. We alerted you a couple of weeks back that they had topped. Many are now rolling over. This could be a huge negative going forward as this area is another important indicator for both the market as well as the direction of interest rates.





Another area affected by rates is also rolling over...the REITS. Take a gander of the (IYR | Quote | Chart | News | PowerRating) and you will see a chart under pressure.



The NASDAQ, (NDX | Quote | Chart | News | PowerRating) and (SOX | Quote | Chart | News | PowerRating) continue to lag...and simply cannot find a friend. I bring this up because you need to know that these areas lead the market up and down. You can also add the BIOTECH'S to this group.

Enough of the negative. Despite the fact that we have not had a confirming follow-through day and that it is now getting late in the game to have one, I like that:

I am finding some leading names moving out and actually holding. Yes...the names of leaders are few and far between but you have to start somewhere. This list includes (FMD | Quote | Chart | News | PowerRating), (CELG | Quote | Chart | News | PowerRating), (ANN | Quote | Chart | News | PowerRating), (GRMN | Quote | Chart | News | PowerRating), (EYE | Quote | Chart | News | PowerRating) and (R | Quote | Chart | News | PowerRating).

I like that (GOOG | Quote | Chart | News | PowerRating) and (CME | Quote | Chart | News | PowerRating) have moved above resistance as well as short-term moving averages. There are certain stocks that have shown to be important indicators for the market. These two fit the bill.

I like that a few names had bullish reactions to their recent earning's reports. Included in this group are names like (FDX | Quote | Chart | News | PowerRating), (BSC | Quote | Chart | News | PowerRating) and (MS | Quote | Chart | News | PowerRating).

I like that the TRANSPORTS are again reasserting themselves. TRANSPORTS have been powerful all the way through the bull move and the fact they are kicking in gear again could potentially be a good sign...potentially.

I like that I am starting to see a few...not many...but a few COMMODITY names moving out of low handles to the upside. This is the first stair step up after a recent trashing. For example, (PD | Quote | Chart | News | PowerRating) just moved above first short-term resistance at $81.95. I bring this group up because they recently led the market.

BUT...and I repeat, until the market confirms that the downside is over...I treat it as an overall bear market/downtrend/bear phase. Keeping that stance without wavering since May 11th has paid tremendous benefits. Bulls should worry that what we seen recently seems is a stop in the massive selling we have seen...and NOT the buying power the market needs to get going. Hold onto your hats this week as The Federal Open MOUTH Committee continues to try to kill this economy.

I am now headed for my surfboard!