Classic Bear Market Action

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.

Happy New Year. I am writing this Monday night to be put out Tuesday morning.  

I have one question... one simple question. Knowing the scare tactics they have used over the past week and knowing those scare tactics put the market on edge, why did Congress actually go to a vote knowing there was not a firm majority? Just what did they expect after the "no" vote? Are these people insane? They set the market up for failure. 

I do believe a deal gets done this week... no matter what... so I was surprised we were smoked so much but when you have fear combined with redemptions, you get what we got.

The Dow was only down about 580 on Monday at 4 pm with the Nasdaq down only about 160. One minute later, the market was much lower. I think there WAS A BAD FUTURES TRADE at the close... and expect futures will be up big tomorrow to fix this discrepancy. Be careful of those who say the market is up big in the morning if I am correct. For instance, ESRX was over $77 at 4 pm but is showing a close of $66... 

This continues to be a classic bear market. Huh! Yup. It is classic in price. It is classic in its action. It is classic in the reaction by Wall Street... only this time, the characters have changed. In the last bear market, it was technology and Internet. In this bear market, it is financials. In the last bear market, it was Enron and Worldcom. In this Bear market, it is Bear Stearns and Lehman. Lastly, the panic we are now seeing is the most classic part of the bear market... thus my recent warning to you that we had not seen that part of the bear market when EVERYONE recognizes it... and everyone wants out. Panicky action is classic in a bear market. All news, all front covers... and all talk is now about the markets and the economy. 

Do not be fooled by the miscreants that the end of the world is at hand. This deleveraging had to happen at some point. We will look back on this in a few years and recognize something had to be done... and since the regulators and ratings services were either in the back pocket or asleep at the wheel, the market did the job for all of us.  

Our economy is always more resilient than it gets credit for. At the end of the day, this country has always survived and snapped back from challenges... including wars, depressions, recessions and 9-11. I am highly confident this too will pass... but it will take time. 

I am happy and proud I saw this coming and have missed this whole bear market. I am now sitting back waiting for the characteristics of a new bull to show up. The best news is that investors are now in an important phase that will ultimately lead to a market turn... and that is exactly what you are seeing. It is anyone's guess as to where this ends or how far it goes. I will remain defensive to the maximum until I  see real signs of accumulation... but it hasn't happened yet.

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.