It's Not Over Yet, but There's Some Short-Term Hope

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.

Running off at the mouth!

You must go to youtube and see Ron Paul school Ben Bernanke during Congressional testimony. Bernanke looked like Ralph Kramden appearing on the $64,000 question when asked who wrote Suwanee River. "Huminah huminah huminah...Ed Norton?"

Angelo Mozilo AKA "THE TANNED ONE"...the CEO of Countrypuke Financial claims his company is a victim of circumstances. In the Comedy Central quote of the year, he stated that it was the borrowers who forced Countrypuke into lowering their mortgage lending standards. I swear I did not make this up.

I think I may have to quit my job and become a securities lawyer...doesn't matter which side you represent. I expect legal budgets are going to go up 100 fold in the next couple of years...and rightfully so. Get ready to hear the two words "class action" several hundred times in coming months.

In past reports, I have told you that my unofficial Kaltbaum retail indicator was quite bearish...as my visits to many stores were a horror show. I have believed that housing and retail were in their own recessions but held off saying or thinking the whole economy was in recession. My main reason was that the overall stock market had not budged. I have never seen a stock market NOT go down in advance of one. I now have to alter that stance as the market is now coming in...and must also add another bit of important evidence of an economy in trouble....and that is the volume at our container ports. An article in American Shipper Magazine (yes,there is a magazine for shipping) provided evidence that things are slowing down rapidly at our ports. For me, this has always been one of the top clues to economic growth. The article stated things are slow and that volumes have continued to decline. Businesses are thinking differently these days...and are slowing down their purchasing. These businesses are the smart money.

The most important point I wanted to make today is the same point I have been making for weeks...which finally came back to haunt the market. And that is while the NASDAQ and NASDAQ 100 were just at new highs, the NASDAQ A/D line was at all-time lows. As I have told you, these types of negative divergences always end badly. The NASDAQ and NASDAQ 100 were living off the moves in GOOGLE, APPLE, RIMM, CISCO and several others. Everything else was sold off to buy these few names. When the music stops, momentum to the upside become momentum to the downside. Most all the leading big cap TECH names were absolutely obliterated this past week. The most important thing you need to take away from this is to NOT listen to all the noise you are going to hear. You will hear:

"REITERATE BUY AND LONG-TERM PRICE TARGET!"

"FUNDAMENTALS HAVE NOT CHANGED!"

"SELLING IS OVERDONE!"

"SELLING IS AN OVERREACTION!"

You see, this is what you always hear as things are going lower. Wall Street has never learned and never will learn. I do not know how long this carnage lasts and how far it goes. I do know that to not listen to the market is folly...and the market spoke loud and clear this past week. With the break in so many BIG-CAP TECH names, there is not much to help the NASDAQ advance further. For sure, there is going to be bounces...violent bounces. Do not be sucked in. Bounces at this juncture are now sellable...not the other way around. This move in the NASDAQ and NDX is simply a joining of the 70% of the market that is already in a bear phase...some in a major bear phase.

I do believe something almost bullish occurred in the past couple of days and that is the down and out FINANCIALS may be sold out in the near term. After all, many have crashed in the past two weeks. Again, I would not be fooled. When a Morgan Stanley drops from $67 to $50 in 2 weeks, a bounce will occur. Notwithstanding another not so surprising blow-up in another financial name, I believe we may see a little better relative strength over the next few days.

My last thought is about the Fed. The markets are in the midst of giving everything back from not only the Fed rate cuts...but the trillions that the Fed has dropped into the system over the past months. Food for thought.

Gary Kaltbaum