Conflicted

  • November 4, 2002
  • Gary Kaltbaum


I am conflicted. Most of the time, I have a
strong thought about market conditions…not right now. I am seeing some good
and I am seeing some not so good. Which way does the market fall? Well…heck if
I know, but I will react to whatever happens.

Here are my thoughts.

This week could be very important. Lots of stuff going on.

As of this writing, Microsoft
(
MSFT |
Quote |
Chart |
News |
PowerRating) is
up over $3 on their legal victory. That should move the
Dow and S&P 500
out of their three-week trading range…a bullish occurrence. Of course, the
market could reverse, negating the move.

Elections are taking place on Tuesday. We wake up Wednesday to the
outcome…which will have a direct short-term impact.

The Fed meets on Wednesday. I continue to be amazed at the almost obsessive talk
on CNBC about this. Last I looked, the Fed has lowered rates 11 times. I think
they need to go back to Jan 3, 2001, and see where the market was when they
first cut rates.

Cisco
(
CSCO |
Quote |
Chart |
News |
PowerRating) reports Wednesday after
the close. Normally, I wouldn’t mention this, but with the market acting
positively, even to bad news in TECHLAND, it is something that must be watched.
Of course, Einstein, Galileo and Steven Hawking put together could not figure
out all the charge-offs, write-offs, and all the other stuff that goes along
with CSCO’s earnings report.

Now, all that is just the news. It is our job to interpret the action to the
news. That’s then…this is now. Let’s look at some positives and some
negatives.

  • It is a positive
    that the a/d figures are in great shape. Always something to watch.

  • It is a positive
    that up/down volume has been terrific over the past few weeks…even with the
    market staying in a trading range.

  • It is a positive
    that the market has shrugged off several distribution days and stayed in a
    trading range…which more than likely breaks out.

  • I think it’s a
    positive that TECH and
    TELECOM are leading the way.

Believe it or
not…that’s the positives. The market is leaving several negative footprints on
the ground while it tries to push higher. Here are a few.

  • As I said, volume
    has been stronger on the down days and lighter on the up days. This most
    definitely has to change.

  • Breakouts continue
    to fail. Yes, there are a few that are doing well, but then there are all the
    SCHOOLS that were leading. There were the
    HMOs that were leading. There were the
    HOSPITALS that were leading. Not anymore. 

  • Bullishness is
    starting to become rampant. Here are a few figures and thoughts. After a three
    week rally:

a. Bullish
advisors have skyrocketed from 28% to 43%…Bearish advisors have done the
opposite going from 43% to 28%. The wrong-way crowd is at it again.

b. The VIX and VXN have plunged.

c. Put/calls have plunged.

d. My audience has changed. No longer am I getting calls about
shorting, but am now getting calls about speculating in Nortel, Lucent, and
the like.

  • TECH and TELECOM
    are leading the way. Didn’t I say that was a positive? Maybe. But I  am not so
    sure it is a positive in a bear market…maybe in a bull. These TECHS and
    TELECOMS have had big pops in the past 30 months only to eventually go lower
    and lower.

Whatever the case, I
am going slow. I am getting stopped out of great-looking shorts and watching two
out of three breakouts fail. Nothing wrong with the  intermediate player kicking
back until the clouds clear.

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