Why semiconductor leadership is so important
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
The investigators looking at Fannie Mae decided not
to press criminal charges against anyone despite finding a $10.8 billion fraud.
Let me get this straight…Martha Stewart goes to jail for something that
affected absolutely no one…but the scabs that ran Fannie Mae get off free as a
bird in flight. Ladies and gentlemen, there is not a level playing field in
corporate America. It pays to be politically well-connected.
Iran is ignoring the U.N. No kidding! In case you did not know, the U.N.
Security Council gave Iran 30 days to halt its uranium enrichment. THAT WAS BACK
ON MARCH 29. This is just another in the long list of Iran shooting the middle
finger at the rest of the world. Hopefully, the rest of the world wakes up one
day.
On a lighter note:
The over/under on Terrell Owens lasting with the Cowboys is now 6 games…and
I think that is being optimistic.
Reggie Bush is the next Barry Sanders…if not better. You heard it right
here.
Over a year ago on Fox News Channel, I stated that not only was there a
housing bubble but worse, there was a credit bubble. I received a lot of hate
mail on this…not any more. The housing market is now getting its comeuppance
while and the lending business is imploding. H&R Block just took a $102 million
loan loss provision because of an increase in early payment deliquencies. This
is just the beginning as so many bought homes that they could not afford because
the lenders were enablers. Â
When I told you at the top of this bear phase that the DOW and S&P would
outperform, little did I know by how much. My thesis was simple. In past bearish
action, the market would become very defensive by buying up the most mega-cap of
stocks. This occurs because the big money crowd wants to own the most liquid and
most boring stocks because they don’t want to get in trouble. It is simply
easier to sell a GE or a CITIGROUP than a BROADCOM or a QUALCOM.
There is now a heck of a lot of talk about the DOW and S&P being only a few
percent off their highs…but the DOW and S&P are not representative of the
MARKET. Because of cap-weighting, 50 of the 500 stocks that represent the S&P
make up almost half the indices’ movement…and of course, the DOW is only 30
stocks. I can also tell you that 10 stocks account for 53% of the NASDAQ 100 but
that is not what is important to me right now. What is important is that the DOW
and S&P are masking some major carnage in the market.
The easiest way to look at this is by comparing the big-cap indices to the
small and mid cap indices. There is no comparison right now as big cap is
outperforming by a wide margin. I do not believe this can last. I believe
something has to give…and believe it is going to be sooner rather than later.
Either the major indices are going to drop to play catch-up just like they did
starting in May or all the sectors that are imploding are going to find a low
and turn back up. I suspect the major indices are going to play catch-up to the
RAILS, AIRLINES, TRUCKERS, AIR FREIGHT which all make up the TRANSPORTS. I
suspect they will also play catch-up to the RETAILERS, GAMING, HOUSING, LENDERS,
MORTGAGE-RELATED, CONSTRUCTION, INDUSTRIALS, RESTAURANTS and many other sectors
that you don’t here about. The average investor hears about the DOW and S&P.
What I suspect does not matter though. My job as a technician is to see what I
am seeing and then wait for the next move. The next move will tell me everything
I need to know. I will be just fine if the bottom lifts. I just do not believe
this is what odds favor right now.
The DOW, S&P, NASDAQ, NDX and the SOX are all in decent shape after the move
up in the past few weeks. The DOW and S&P are in normal pullback mode near their
recent highs.. The NASDAQ, NDX and the SOX are also in pullback mode but they
are just off their lows. I don’t put it past those areas to move above near-term
resistance but if all those negative areas listed do not join, it will be just a
screaming negative divergence. Those resisitance areas are DOW 11,393…S&P
1302…NASDAQ 2168…NDX 1584…SOX 453. There is just no way that TOBACCO,
FOOD, BEVERAGES, DRUGS, MEDIAÂ and miscellaneous HEALTHCARE are going to lead
the market for too long. These are the DEFENSIVE areas I have been telling you
about that lead when the economy is in a major slowdown. Nothing has changed
there. You can also add the SHIPPERS as in a bull market. Notice one area I have
mentioned in the past as a leader is now off the list…and this could be the
catalyst for the next move….
That group is the INTEREST-RATE-sensitive group which includes the BIG
FINANCIALS which are now starting to show distibution as well as many other
INTEREST-RATE SENSITIVE stocks. I would not ignore this as INTEREST-RATE
SENSITIVE stocks make up a big part of the S&P as well as the NYSE. I am seeing
near-term tops in BROKERS, REGIONAL BANKS and many smaller banks. I am also
seeing some subtle distribution in names like WELLS FARGO and BANK AMERICA. The
market will not stand losing this area and will be watching closely.
Lastly, I am watching the TECHNOLOGY/SEMICONDUCTORS like a hawk. As you know,
I am a big believer in SEMICONDUCTOR leadership. Right now, many names are
acting constructively off their lows and even finding some leadership in names
like IDTI, VSEA, and a couple of others. So far…so good. But let me be clear,
the day the market loses this decent action, stick a fork into the market.
Gary Kaltbaum
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