Negative divergences

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. 888-484-8220 ext. 1.

The first thing I want to say is to pay no attention to what the DOW did on Tuesday. The average stock was much much worse. In fact, the A/D was 3-1 to the negative. The DOW held up because the market is getting defensive. When it gets defensive...it goes defensive. THERE IS NO WAY THE MARKET WILL BE ABLE TO STAND TOO MANY MORE OF THESE DAYS! Everyone needs to watch this closely. At the very least, the market has lost many areas and many names to help it go higher. In fact, today had probably the largest and widest divergence between the DOW and the real market we have seen in a long time. We would rather see the DOW down 100 with the A/D flat. Most people do not get this.

We have been negative on the following areas and nothing we have see changes our stance.

For the most part, COMMODITY stocks are being mutilated. I believe many are now in their own private bear markets...which means sell any bounce. OILS continue to roll over badly. Even the strongest names we mentioned recently have now broke down. When the strong names break down, you know the weak ones are in big trouble. Take a look at the (OIH | Quote | Chart | News | PowerRating). A break below $132...and see ya for another leg down.

The (XLE | Quote | Chart | News | PowerRating) is actually weaker.

The NDX is tracing out about as ugly a top as I have seen...a big giant head and shoulders top. Please do not ignore this. I have been telling you that this is the weakest of the major indices and nothing has changed with that stance. A double bottom break below 1633 would be very negative. The NASDAQ is back below the 50-day moving average while the S&P is sitting right on it.

The BOND MARKET has been rolling over. Near-term, maybe a little oversold but the action is starting to be of intermediate-term consequence and maybe longer.

On that note, the INTEREST-RATE SENSITIVE UTILITIES have also rolled over. This is just another important indicator for the market. This also goes into the negative column.

GOLD continues its own bearish phase. GOLD STOCKS are acting miserably and completely underperforming the metal.

The market lost the (SOX | Quote | Chart | News | PowerRating) in the past couple of days. In fact, the SOX easily sliced through the 50-day moving average for the first time since November. This should not be ignored as the SOX is either feast or famine and is and has been a leading indicator for the market.

I am now also seeing foreign markets acting toppy. This also goes in the negative column. So far, it has been a normal pullback but noticing places like JAPAN potentially getting in some trouble here. Foreign markets have completely outperformed our market. This would be a distinct negative.

Lastly, not much good but some good from Tuesday. We are seeing good money flows and decent charts in some of the big banks like (WB | Quote | Chart | News | PowerRating), (CBH | Quote | Chart | News | PowerRating)...but not sure of longevity. Also, the AIRLINES continue to act well on the back of lower oil. FINANCIALS and DOW stocks were the ports in the storm.

Gary