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.
I was all set to write a report yesterday morning but held back because of the big gap. Very simply, it is not a bullish sign when a market opens up hot and reverses badly. It sells you that at those levels, sellers have the upper hand. Normally, after such a reversal, markets will follow through to whichever way the reversal occurs. Sector-wise, it changes nothing.
I continue to be bearish on just about everything COMMODITY... including OILS, GOLD/SILVER, COAL, FERTILIZER, METALS/MINING, STEEL and the anything you can drop on your foot and it hurts. Please recall that this top was called by me on July 2... when I stated the COMMODITIES gave me a major sell signal that day. Almost everything COMMODITY indeed topped that day with OIL and GOLD topping July 15th. Up until late July I was still bullish on GOLD... thus the importance of flexibility when you see things change. Of course, that top in OIL bottomed the CONSUMER end of the market. This includes FINANCIALS, AIRLINES, TRANSPORTS, RETAIL, TRAVEL, HOUSING and the like. This continues, the question is for how long? I bring up how long because it is important to recognize that if these CONSUMER areas ever do top, that will be your next leg down in this market. The CONSUMER areas have a much bigger impact on the major averages than the COMMODITIES. They held up well during Tuesday's reversal.
The NASDAQ/NDX is now starting to lag... and maybe badly. I guess TECH is not that DEFENSIVE. For starters, the SEMIS continue to act terribly. Arguably, they are already starting to roll over again. But more important to me is the action in Apple ( AAPL | Quote | Chart | News | PowerRating) and Research in Motion ( RIMM | Quote | Chart | News | PowerRating). These 2 stalwarts have shown good relative strength but I need you to know that their patterns are quite suspicious as they are both starting to roll over. It is important to recognize that if this occurs, the NASDAQ and NDX will be down for the count. The NDX is already below near term support. The NASDAQ would confirm this breaking below 2345... so it is on the ledge here.
September is the worst month of the year. I could not care less. If the market wants to go higher, it will. It will just be selective. I stopped worrying and thinking about "seasonality" a long time ago as I do not think the market cares what month we are in. Be cognizant of it... but just watch the market.
WORLD MARKETS continue to lag our markets. I continue to be amazed at those who have not studied the characteristics of bear markets which include WORLD MARKETS just about always lagging. This is because they are less liquid than our markets. In bear markets, fully invested funds want to own the most liquid assets... thus they head back our way. I do make note that many also are lagging because they are COMMODITY laden.
There continues to be very little in the way of leadership. I have watched a handful of growth names break out and then tuck their heads in immediately like a frightened turtle. If there is ever one characteristic of a bull market that must be shown, it is strong growth leadership.
I continue to pay much more attention to the sectors than the major indices because of the 2-way tape. It should be obvious that indexing is a loser's game right now as the S&P remains 20% below the highs of the year 2000. I do suspect markets will show their hand soon as they cannot continue to wedge up on light volume forever. I will hold out hope but typically light volume wedges to the upside do not resolve themselves nicely.
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