Could this be the low?

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.

"Bernanke got it right this time!"
"Bernanke is where he ought to be!"
"Hail Bernanke!"

It is amazing how an up day makes a hero out of someone who has been buried by most talking heads. What if whatever Big Ben said actually sent the market's reeling? It is amazing how people tie popularity to what the markets do for one day. That said...WE NEVER UNDERESTIMATE THE POWER OF THE FED TO MOVE MARKETS! You shouldn't either.

Some thoughts:

The #1 rule of bear markets. RALLIES ARE SHARP AND NOISY. Here we go again. How many 200 point up days have we had since the top? 3...Count em...3 in the last month. Is #3 the charm? Time will tell.

In a bear phase, we are always watching for a follow-through on the 4th-7th day. Today was day 2 off the low.

In our last report, we told you markets were now extended to the downside and were due to bounce to relieve the condition. We compared it to the last time the market bounced. Well...we now have the bounce...but what next? We did the double scan...and in depth...so here are in-depth thoughts.

The NASDAQ/NDX/SOX trifecta continue to lag badly. Wednesday's action did not even put a blip into the charts. This must be watched as these are the areas that lead the markets up and lead the markets down. All trade way below resistance as well as moving averages.

The DOW held support to almost the penny...right around 10,700. It is normal to hold this level as it was the important level the DOW broke out of in November 05. In fact, you can draw a line going back a year at this level. It will be vital that the DOW holds 10,700.



The S&P put what I would consider a "double bottom" in place...at least for the near-term...around 1220 This occurs when something goes back to revisit the lows and holds.



Ditto the RUSSELL 2000 at 670 and the MIDCAP 400 at 713.

After 2 months of misery, could this be the lows? We believe anything can happen. We have seen vicious bear markets in the past that lasted only a couple of months. 1998 comes to mind. We'll bite. We just believe in evidence...and one oversold rally, while a start...is only that...a start.

We love that FINANCIALS like (WFC | Quote | Chart | News | PowerRating), (MI | Quote | Chart | News | PowerRating), (BAC | Quote | Chart | News | PowerRating), (CBSS | Quote | Chart | News | PowerRating), and others are either setting up or breaking out. We never have a problem when FINANCIALS outperform.

DEFENSIVE areas like (PEP | Quote | Chart | News | PowerRating), (CL | Quote | Chart | News | PowerRating) and (ECL | Quote | Chart | News | PowerRating) are still leading.

HEALTHCARE is still leading as HMOs and others have the bid. In fact, big-cap PHARMA is shaping up nicely.



Lastly, INTEREST-RATE sensitive areas like UTILITIES and REITS are now outperforming. REITS broke down weeks back but while the rest of the market gagged, found support and turned back up.

If this better low will have meaning, we suspect there needs to be time building new bases. We will give the market every chance.