Stocks Staying the Course

Gary Kaltbaum is an investment adviser 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.

As I started to write this report, I realized not much has changed from by May 11th report. At that time, I told you that the market looked like it was stalling and a pullback would ensue. Since that report, that is all that has happened... a nominal pullback as most major indices as well as the market stalled at the longer term 200-day moving average. This is not a bad thing. In fact, it is quite normal, it happened in December of 2002 after the first bottom of that bear in October of 02. The market ultimately bottomed in March of 03. Whether or not it plays out the same way is another story.

So... I continue to believe the market is in pullback mode... but so far, it has been constructive, controlled and rotational. As long as that continues, it is a buy on pullbacks.

Here are some short term technical thoughts.

The TRANSPORTS at 50-day avg... will need to hold. A break below will not be thrilling. Of course, oil prices have not helped.

The SOX is just above the 50-day and needs to hold. A couple of the bigger names are sitting right on support. I believe the SOX is an important index.

DOW support at 8230 and then 8000 which is 50-day average... resistance at 8587.

S&P support at 878 and then 850 which is the 50-day... resistance at 930.

NASDAQ and NDX were distributed at the highs at 1773 and 1435 respectively. May 7th was another day where they were sold off on reversal. NASDAQ support at 1664 and 1620 which is 50-day. NDX support at 1339 and 1320 which is 50-day.

OILS, METALS, MINING and the like all hit 200-day and were sold...but all look ok. They may just need more time. I would love some more resting and testing into support and/or moving averages. Remember, these areas completed 7-month bottoming processes but are now into the meat of their first resistance areas.

RETAIL and FINANCIALS also pulled in. RETAIL has some ugly bars off highs...but is now nearing 50-day average. A break below will also not be thrilling. FINANCIALS are back to their recent breakout. A violation would not help the cause. Frankly, I am amazed that these stocks aren't much lower as secondary offerings have come out on a daily basis. Of course, the "timely" upgrades by analysts did help.

NATURAL GAS broke above the 50-day and then below... nothing to think about... very surprising.

The DOLLAR and BONDS have been trashed... with GOLD benefiting. I am in the camp that the DOLLAR and BONDS will now bounce while GOLD will start pulling back into support. Very simply, the DOLLAR and BONDS are oversold and GOLD is overbought... but the BIG PICTURE is that the DOLLAR and BONDS are gross... with GOLD in a 14-month trading range. A break above the highs for GOLD and look out. Long bases work best on the breaks.

As I scan thousands of stocks, I still have only maybe 20 stocks that have what I call real growth and leadership characteristics... and that may be even reaching. Because of the rally off the lows, more and more names are coming up right sides but will need more time.

I am hoping for a longer pullback in both price and time...but have zero opinion on whether it occurs. No doubt the market hit a wall at the 200-day but for me, that is normal...and for me, unless things change, eventually, markets will get through it. CHINA and other COMMODITY countries are the strongest but would love them to PULL INTO support. I believe there is a chance we are now starting to see this.

There are a lot of COMMODITY names in tight pullbacks here. Stay on top of any breaks to the upside or light volume pullbacks into support/moving averages...and of course, stay on top of the new high list. All leadership has to hit that list.

This week is end of month so suspect we get the usual window dressing. But June is most often a less than thrilling month. As I said, I would love to see pullbacks like we saw after the first move up off the October lows in '02 before the final bottom in March '03. Time will tell. I have no great edge here as the market rests. Resting is good. I believe any further pullback will be controlled and rotational as the charts have very much improved. It may just need some more time.

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