The Markets are Rotating Well

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.

I try to look at the market through the trees and the forest. The trees is the shorter-term action while the more important forest is the longer term action. Two weeks ago, I told you I thought the market would pull back in the shorter term. Longer term, I thought things were continuing to improve. Overall, not much has changed, but underneath the surface, many sectors are changing.

Sector-wise, I believe the groups that moved first like the RETAIL, RESTAURANTS, TECHNOLOGY and the like are now stretched and extended and will now be pulling in. I would be using the pullback in these leading areas to buy but would wait for logical points to buy. I would be looking for support areas and or moving averages. As far as TECHNOLOGY, please notice that the NASDAQ and the NDX are now back into the longer-term 200-day moving average. It would be quite normal to stall here. This is the same place the NASDAQ stalled and pulled in back in late 2002 before pulling back and then putting in a final bottom in March of '03. I also find it uncanny that back in '02, it took 37 trading days to get back to the 200-day average. Would you like to guess how many trading days have occurred since the recent lows? Yup...37 days. Food for thought.

But when markets are doing better, when something pulls in, other things come to the forefront, keeping the major averages in good shape. What's now coming to the forefront? COMMODITIES are now starting to get the bid. OILS, STEEL, METALS/MINING, COAL, SHIPPERS and FERTILIZERS are now all completing 6-7 month bottoming processes. All areas should be looked at. And let this be a lesson to those who listened to the pundits that called bottoms on every up day during the bear market. Bottoms do not happen in a day. They happen with time and price. The reason why the COMMODITIES took so long was because of how far they had crashed. The deeper the drop, the longer it takes to repair. I absolutely love the COMMODITIES area here on any pullback into support and/or moving averages or a breakout above resistance. They are under owned and unloved but have great accumulation patterns.

I would also continue to emphasize Asian markets as they have taken the lead in a big way. Asian markets bottomed first, held up best and are now leading the upside...and will continue to lead the upside.

Lastly, I would continue to stay far away from BIOTECH, DRUGS and most HEALTHCARE along with SCHOOLS, FOOD and BEVERAGE and other DEFENSIVE areas. GOLD is still hanging in there but GOLD stocks continue to act poorly.

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 cannot assure its accuracy or completeness. Neither the information nor 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.