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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.
Well...that was a doozy! Lots of notes!
Tuesday's action was downright ugly but what to take from it. Before we get into that, I have a little statistic I wanted to share.
Since the beginning of the 2006, here are the cumulative S&P 500 returns by days of the week:
Monday 1.40%
Tuesday -0.36%
Wednesday 18.72%
Thursday 4.36%
Friday -0.61%
Today is Wednesday...so with markets very oversold on a short-term basis?
My next question is to ask: what is the Fed worried about? After all, they have been telling us the mortgage problem is no big deal. Why were 3 Fedheads out this morning telling everyone not to worry? Why is it that on every down day in the market that the Fedheads feel they have to calm the markets? These are the people that enabled the problems to occur. These are the people that said subprime lending was good for the economy. These are the people who oversaw the worst lending practices we have seen in decades. And we are supposed to listen to these people?
In any case, all I saw happen yesterday was that the worse became worser. These are the areas I have been yelling about. They include BANKS, REGIONAL BANKS, S&Ls, LENDERS, UTILITIES, MORTGAGE-RELATED, RETAIL and those ugly, ugly BROKERS.. On the other end, the best decided to come in. There is no doubt my thesis that the RUSSELL 2000 would lead down if we saw any downside is occurring...as the RUSSELL broke badly yesterday. It just so happens that the rest of the market decided to follow. So what next? Does the market follow through to the downside or does it put up a stand. Simple! I DON'T KNOW! All I can do as a follower of market action is to look at important support levels...and if they break, I deal with them. At this point in time, I would suggest to watch the recent double bottom the S&P put in around 1485. If it is taken out, then we can start talking about a good correction. For me, that will be of import. If it doesn't break, it tells you the BIG CAP area of the market wants to hold.
But be rest assured, there has been a lot of technical damage done recently. You do not see 600 new lows and think all is well. But I am not stupid. This market has had 10 lives...and I don't think this market wants to die easily...thus I will watch that S&P support level. This does not take away from my thoughts of the many areas that are in bear mode. Keep in mind, those bear areas are about as stretched and extended to the downside as I have seen in a while...thus dont be surprised if we start to see sharp and violent bounces to relieve the downside pressure.
I still like the action in the SEMIS...at least many of the SEMIS and cant help but like the action in BIG-CAP TECH. Stocks like ORCL, MSFT, EMC and a few others continue to lead...albeit slowly.
One of the points I have made was that the market will not get into trouble until OILS get into trouble as they have led up. I repeat what I have recently said. More and more OIL names are breaking. This must be watched. The good news is that I am seeing a few gap up this morning on their earnings reports.
As far as the leading names I have been mentioning, they were smacked also...but as of this writing, I am seeing AMZN up over $15...I am seeing BOBJ up over $3.50...I am seeing BA up almost $3. I am not so sure we would be seeing that type of action if the market was going to get into real trouble...but once again, I will defer to the major index action.
Markets are opening up strong this morning on the back of good reactions to earnings as well as the Fedheads waking up early to tell everyone things are fine. A little hint...in bear phases, markets open up strong and finish poorly. It is only one day but I will be watching today closely. I have no prediction but it will not thrill if markets sell off the early strength.
Gary Kaltbaum
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