Into the Meat of Resistance

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.

Raise your hands if you believe the FINANCIAL industry had net hiring of 3,000 last month? Who are they trying to kid?

Upon, the Microsoft (MSFT | Quote | Chart | News | PowerRating) and Yahoo (YHOO | Quote | Chart | News | PowerRating) first announcement, I told anyone who would listen to sell their YHOO off the bump from $19 to $30. That was a gift! I did not believe anyone would pay up... and actually was surprised MSFT was willing to go a little higher. I just saw more risk than reward. YHOO now trading under $24 today. Frankly, I believe if nothing else happens, if the market comes in again, you'll see YHOO stock under $20 again. YHOO and MSFT have much too much culture clash.

Every day, I am inundated with reports about sentiment... most of these reports do not have a clue on how to rate sentiment. They treat it as a primary indicator when it is secondary... at best. Please pay 99% of your attention to price and volume. Overall, my biggest issue about sentiment right now is that it feels a little too widely accepted that the bull market is back and that the worst is over. Time will tell.

More importantly, short term, it is normal for the markets to pull in after they rally up into their longer-term moving averages... just like the DJIA did on Friday... but that should not sway you from the doubly important part of this market... and that is there are bull and bear markets sitting side by side... and it is more important to do sector by sector analysis than the overall market right now.

Last time, I told you the COMMODITIES were toppy and due to pull back. On cue, they were smoked. But in bull markets, extended stocks pull back to moving averages or support before bouncing higher again and that is exactly what happened on Thursday as OILS, COAL, STEEL, FERTS and other commodities pulled in hard and reversed off these important support areas. So... commodities remain in play and remain the strongest areas of the market. I won't even discuss OIL prices. Just do the opposite of what I say!

We are getting leadership from the BIG-CAP NASDAQ 100 names that I talked about so much last year. Names like Apple (AAPL | Quote | Chart | News | PowerRating), Google (GOOG | Quote | Chart | News | PowerRating), and Research in Motion (RIMM | Quote | Chart | News | PowerRating) now have the bid again. Just remember, like last year, it remained a select few as the A/D of the NASDAQ continues to hang near ALL-TIME LOWS... which is amazing in itself. It tells you any NASDAQ rally is the opposite of broad-based.

I have also made note that the worst bear market areas held the lows, came off the lows and have been building a little head of steam. This includes the all-important RETAIL, FINANCIALS and SEMIS. If the markets are going to continue to attempt higher prices it will be because these areas continue to join the commodities to the upside. This may be tough in the near-term as these areas are right into the start of massive overhead resistance. Time will tell.

The best news is that there has been overall technical improvement as more and more names have turned the corner. Just take your time as this game has not been easy. Bulls should hope markets come in here to wipe the smiles off the bulls' faces. There has just been too much acceptance.