If You Want To Play The Bounce, You Must Be Aware Of This…

  • August 16, 2004
  • Gary Kaltbaum

I heard and read
several thousand people calling for a bounce at this point in
time. That’s great. I hope we get one…and
probably will. BUT…in no way is that the important point. While many want to
catch every bounce, the most important point to remember right now is bounces
aside, the market is now longer-term negative. And until things change, I want
you to continue to treat is as such. Why do I say that? Well, just read all of
my reports since the 3rd week in January. But as a refresher, here is the long
list…in no particular order.

 

First off the market is following my script to a
tee. I told you way back in late January-early February that the worst place to
be would be the NASDAQ. The NASDAQ always leads both up and down because of its
make-up of “high flyers.” The NASDAQ will have the sharpest bounce if it occur.
I also told you the DOW/S&P would eventually follow suit.

 

All major indices broke down from a reverse cup and
handle. These chart patterns are successful more often than not.

 

Volume on the up-days is anemic while volume on the
down days expands.

 

Mutual fund cash is down to a paltry 4.4%. This
number is just about the same it was back in early 2000.

 

I can count on both hands good bases to buy off of.
After scanning this weekend, my best guess is only 20-25% of stocks are in good
technical shape. As far as groups, I think of maybe 2 or 3 that are still OK.
One of them is UTILITIES, the other are BIG-OIL-related. Most other OIL groups
have topped out. 

 

NEW HIGHS have contracted down to nothing. NEW LOWS
have expanded markedly.

 

BROKERAGE STOCKS are in a bear market.

 

The SOX continues its death drop. I have told you
for years that the SOX leads the market.

 

There are still too many bulls and no one seems to
worried.

 

I can go on and on. In spite of any potential
bounce…and yes, the market is overdue, I want you to look to sell into any
bounce…not buy. My thought here is that if the NASDAQ hits the 20% point on
the downside, the world will then call it a bear market. It is just a stone’s
throw away.  That would be the perfect spot for a bounce.  Keep in mind, if the
DOW and S&P hit the 20% mark, it will be late in the bear market while most
pundits will just be first calling it a bear market. This is important to know
as we will be gearing up for the long side just when everyone is hearing we are
in a bear market. As always, it is imperative we keep focus on what we are
seeing and not what we are hearing.

 


Gary Kaltbaum


P.S.

I have never written twice in 1 day but today I
must. After writing my report on Sunday…and taking the red-eye back from
Vegas overnight, I saw something that made me stand up and take notice.

 

In this morning’s report, one of the things I
wrote was:

 

 

“My thought here is that if the NASDAQ
hits the 20% point on the downside, the world will then call it a bear market.
It is just a stone’s throw away.  That would be the perfect spot for a
bounce. “

 

So…what’s in the Wall Street Journal this
morning? Front cover of section C…the title…”TECH SHARES APPROACH BEAR
MARKET STATUS.” Ladies and gentleman, with market’s way oversold, a headline
like this would be a classic time for the overdue bounce. As of this writing,
the market is already up nicely.

 

Let’s keep it in perspective though. Do not get
all frothed up here because any bounce comes out of weakness, not strength.
Those who are looking to short…it would be wise to wait and let this bounce
run its course. As I have told you, all these bounces do is relieve oversold
conditions. Let’s see where the bounce wants to take us.

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