This Is How I Stay In Front Of This Game

  • June 9, 2003
  • Gary Kaltbaum


Regardless of what I say about the short-term, keep in
mind that the market continues to be in fine technical shape…but,
odds favor, the market may have put in a near-term top on Friday.

First off, just on a price basis, the market became extended…particularly in
the BIOTECHS…which literally experienced a
“melt-up over the past few days.” Corrections do occur…and this is as good a
time as any.

Second, the market experienced a high-volume reversal day…especially on the
Nasdaq
(
$COMP |
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PowerRating)  which traded over 3
billion shares. This is a sign  of buyers becoming exhausted and sellers taking
the upper hand. For example, ImClone
(
IMCLE |
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was up $10 on Friday’s open as psychotic investors piled on top of each other
regardless of price or past movement. The stock finished down on the day as the
big money distributed stock into an unwary public’s hand. Do you think these
investors who bought IMCLE on Friday morning learned any lesson from the last
three years that you don’t buy a stock after it has already tripled in eight
days? Guess not.

Third, it “feels” like  leading INTERNET names are
starting to act toppy. Take a look at the charts of
eBay
(
EBAY |
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PowerRating), Yahoo!
(
YHOO |
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and Amazon
(
AMZN |
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PowerRating).  Since the INTERNET
group has been leading, it is important to watch.

But don’t get yourself all twisted by these short-term problems. The technical
condition of the market is still in fine shape. A correction here would serve to
work off the recent frothy and  speculative frenzy. It will also give the major
averages a chance to pull back into support …making the technical condition
even stronger.

The last point I want to make is for you to not ignore new breakouts. While many
extended names could pull their horns in a bit, strong markets will rotate into
new areas. Look for those breakouts on a daily basis whether the market decides
to correct or not.

And one final note. I am now being asked on
a daily basis about my longer-term thoughts about this market being a secular
bear market…one in which we have mini-bull markets. Of course, no one was
doubting this 12 weeks ago. My thoughts have not changed. Keep in mind, during
the last secular bear market, there were many mini-bulls covering lots of
territory. Just think how many big rallies we have had since the top in 2000.

BUT…all this rhetoric does not matter. The market couldn’t care less what I
think. It is going to do whatever it wants to do regardless. And regardless of
my longer-term thoughts, I am going to continue to interpret the daily market
changes to try and stay in front of this game. One does not need to know where
the market will be next year. You just need to know what is happening today. But
of course, if I had Barbara Eden as my Jeannie, she would blink next week’s
newspaper for me to read today…just like she did for Roger Healy.

Gary Kaltbaum