The Market is Without Leadership and Falling

Gary Kaltbaum is an investment advisor with over 18 years experience, and a Fox News Channel Business Contributor. Gary is the author of The Investor's 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.

Greetings from Maui. First off, let me state it is not my fault the market is being trashed.

Normally, markets go up while I am on vacation ... but yikes this time! Here are the numbers since I left: The DOW is down almost 850 points, the S&P over 81 points and the NASDAQ a whopping 211 points.  

I have a few random thoughts that I want you to pay attention to.  

Did I hear Hank Paulson correctly? Something about putting things into motion that would allow a big bank to fail and not hurt the system. What does he know? Stay tuned! 

Lesson #1: You should have learned by now: LOW WILL GO LOWER. I have been telling you that the FINANCIALS and HOUSING started this mess ... and normally the areas that led the way down will go to prices unfathomable. This is continuing to a frightening level.

Lesson #2: You should have learned by now that all this loud sentiment talk is a bunch of hooey in a bear market. The problem with pundits is they have never taken the time to recognize that all the sentiment indicators change in bear markets. When sentiment turns bearish in bull markets, markets put in a low off the pullbacks and then ramp again. When sentiment turns bearish in bear markets, they serve only one purpose ... to work off the oversold condition until sellers show up again. And to repeat a line - OVERSOLD WILL GET MUCH MORE OVERSOLD THAN ANYONE THINKS. I can't tell you how many emails I have received recently about how things were too negative and the market has to turn back up. 

Lesson #3: In bear markets, NEVER EVER EVER listen to Wall Street. Wall Streeet remains a product of bull markets. Wall Street never sees a bear coming until things are already ripped apart by it. Wall Street will give you no help - analysts have been downgrading a ton of stuff AFTER monstrous drops. 

Lesson #4: In bear markets, they usually get everything. Words like "cheap" and "value" are meaningless. The market remains the final arbiter.

Speaking of lesson #4 I have been telling you for several months that the only game to play was some miscellaneous big cap NASDAQ-types which has now turned to dust as the narrow few are cratering along with COAL, STEEL, OILS, METALS, MINING and the like. Let me be clear on this, on Wednesday these areas were taken apart at the seams and some names were down on volume that was the highest ever. This was not Aunt Mary and Uncle Bob selling. This was the big boys getting the heck out of Dodge ... and for me, this is a major sell signal for these areas that have led recently. It is these monstrous volume breaks that I have studied throughout the years, and again let me be clear, this action is a major sell signal ... and for aggressive investors, potential shorts on their bounces up into resistance.  

This leaves the market with literally no leadership. I do recognize that BIOTECHS and some MEDICAL areas have been acting better. But I promise you one thing, these areas are not going to lead the market out of oblivion. The one area that is showing good technical attributes is GOLD, and that is not bullish for the market. 

Lastly, as you know, I have been out front of all the problems we are now seeing and experiencing. I was hoping upon hope that the market would right itself to tell me the economy would somehow hold up. As someone who believes the market is smarter than everyone, this is not a good thing to see the market crumble like this and to especially see so many consumer areas literally melt down.

And now to make matters worse, COMMODITY stocks have now topped badly. This action means that our economy is in dire straits, and not getting better. I don't need to tell you where General Motors (GM | Quote | Chart | News | PowerRating) and Ford (F | Quote | Chart | News | PowerRating) are now trading, and I certainly don't need to tell you about the Financials. I am in hopes you have been listening and letting this market pass as you sit in cash. I have been in cash for weeks...and thankfully so.

There are just simply times where it doesn't pay to play.  

Disclaimer: The opinions expressed herein are those of the writer and may not reflect those of Wunderlich Securities, Inc. or any of its affiliates. The information herein has been obtained from sources believed to be reliable, but we can not assure its accuracy or completeness. Neither the information or any opinion expressed constitutes a solicitation for the purchase or sale of any security. Any reference to past performance is not to be implied or construed as a guarantee of future results.