It's time to focus on these stocks...

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.

There should be no doubt in your minds that this past weekend, the Fed had a conference call over tea and crumpets to entirely change their stance from just the week before. In one week, they went from "inflation is well-contained" to "inflation is at the high end of our targets." Did these trend followers finally see that our beloved Hostess Twinkies have had a sharp increase in price or did one of the Fed heads give his chauffeur the day off and actually pump their own gas? We must tell you that we thought we were actually being hard on the Fed in past weeks but after watching these stumbling, bumbling, fumbling motor mouths, we now think we have been too easy. If you saw Brenda Buttner's rant against Bernanke on Fox News Channel on Tuesday, you know that we agree with her 100%. If this Fed wants to send this economy into recession, they are doing exactly what they need to do. But we don't need to guess, just look at what the market is doing. We have always believed the market is the greatest forecaster and right now, bulls should not like what it is saying.

What we are seeing continues to be classic bear market action. We talked about the Fed but we really don't care why something happens. You can blame it on the Fed. You can blame it on Oil prices. You can blame it on 6/6/06. Doesn't matter to us. Our job is to just interpret the tape. The market did not just get into trouble. it was deteriorating weeks before the May 11 top. Here are our latest thoughts.

The top in GOLD, SILVER, ALUMINUM, COPPER, STEEL, OIL and every other commodity is now gaining teeth. We told you these areas topped out recently and now things are getting ugly. We would not commit one dime to this group that just toped after a climax run. Longer-term, we think there is a chance these areas are still in play...but until we first see a place where the bleeding stops, there is nothing to think about.

The SOX just broke another area of support. Intel (INTC | Quote | Chart | News | PowerRating) looks headed for the low teens. We continue to be amazed by the complacent attitude toward this group that once again has led the market down.



The Dow has finally broke decent support at 11,039. Keep in mind, the Dow will continue to hold up better than the rest of the market...so it is of import that it is now starting to gag. 10,880 is the 200-day moving average. A break below and the Dow joins most of the rest of the major indices in bear market territory.



WORLD MARKETS continue to get smoked. EMERGING MARKETS are in a mini-waterfall here as the illiquidity of these markets are now causing problems. Even the strong JAPAN has completely broke down.

The S&P has now closed a smidge below the 200-day MA. We suspect that if it cant get back above quickly, selling may just pick up. The S&P has broke the 200-day MA even though the BIG CAP BANKS are still acting great. If they top, look out below. Names like (WFC | Quote | Chart | News | PowerRating), (STI | Quote | Chart | News | PowerRating), (BAC | Quote | Chart | News | PowerRating), (C | Quote | Chart | News | PowerRating) and a few others continue to act just fine.



On top of the BIG BANKS, there are a few other areas we like at this time. We continue to like most things defensive. Whenever the market forecasts an economic slowdown, it buys up FOODS, BEVERAGES and the like. Names like (KO | Quote | Chart | News | PowerRating), (CL | Quote | Chart | News | PowerRating), (HNZ | Quote | Chart | News | PowerRating), (DEO | Quote | Chart | News | PowerRating) are still leading. We are also noticing that the defensive HEALTHCARE area is now setting up for higher prices. Lastly, MEDIA stocks like (DIS | Quote | Chart | News | PowerRating), (CMCSA | Quote | Chart | News | PowerRating) and (NWS | Quote | Chart | News | PowerRating) continue to act very well. They came out of their slumbering bear market a couple of months back and have shown no distribution whatsoever.

Gary