The Fed Will Cut Rates Before the Next Meeting

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.

For weeks and for some months, I have been saying the same thing...over and over again. 70% OF THE MARKET WAS ALREADY IN A BEAR MARKET. I have told you that tops in the market take time. Fewer and fewer stocks work...leading to a narrowing of the market. As the market narrows, money flows are concentrated in the largest cap areas because when the market goes defensive, it buys defensive. I have told you that the normal outcome of all this action was negative. This led me to my last report where for the first time, I decided to give out what I considered to be LONG-TERM support levels. This was not by accident as I felt and said..."THE ICE WAS GETTING THINNER!" Very simply, the ice has now cracked. What was a bear market for 70% of the market is now being joined by most everything else...and I am not kidding. Ignore at your own risk.

Before I get more in depth, let me first tell you that I think THE FED WILL PROBABLY CUT RATES BEFORE THE NEXT MEETING. Normally, they would not do that because they would not want to be seen as desperate...but this is a Fed attached to the hip of Uncle Hank...who is attached to the hip of Wall Street. Be careful if that occurs. Many will be out for the umpteenth time to tell you the market has the Fed on its side and it is time to buy. They said the same thing every time the Fed has made a move. And in case you don't know, the Fed has been raining money down onto the system at unprecedented levels for weeks...to no avail. The market has finally figured out what I have been telling you forever...and that is the Fed does not have a clue. It amazes me that so many continue to believe the fed is the savior. As I have told you, they were the cause of the problems...the enablers of the problems and once they saw the problems...did nothing about the problems...so many have absolutely no clue. I expect the Fed to be at 3% fed funds by April.

Now...back to the market. If you recall, throughout December, I told you I wasn't worried about December but I was very worried about January. The reason being that the recent past has seen January selloffs. I noted that the market was headed into January with the worst technical condition I had seen in years. T he popular averages are now playing catch-up to the nauseating action we have seen in the bear market areas. I think it is important that you look at the following charts. First the bear market areas I have been pointing out to you.

As you can see, the SEMIS, RETAIL, FINANCIALS, TRANSPORTS and the SMALL CAPS are now dust. Now take a look at the following charts.

I do not need to tell you how bad the patterns are in the DOW, S&P, NASDAQ and NASDAQ 100. I do need to tell you that you will now be inundated with words like OVERSOLD, CAPITULATION, CHEAP, VALUE and all that Wall Street crap that is meaningless in bear phases. Sure the market is now oversold after the recent move down...but any bounce is the trees. The forest is the whole topping process this market has been going through for months. The short term is a "1" on a scale of 1-10. The overall pattern is a "10."

I can go on and on about the negative technical condition of this market but no need. Just know that in bear phases 7-8 out of 10 stocks go down...many badly. As usual, I have no idea how long this will last or how far it goes. I do know that the big money crowd is now selling the popular indices and I do not want to get in front of that. Areas that remain strong are SOLARS, COAL, FERTILIZERS, AGRICULTURE, OILS, GOLD/SILVER...but expect them to pull in off their recent moves. I also make note that all the RECESSION RESISTANT areas like FOOD, BEVERAGES and TOBACCO are also outperforming...which is normal for an economy that is now buckling under the weight of the housing and lending recessions.

Gary Kaltbaum