Lots Of Setups – In Oil

  • September 23, 2004
  • Gary Kaltbaum

Before I talk
about yesterday, here are
some outtakes from my last 2 reports.

 

“Let
me be clear…I have no idea how long this lasts or how far this move goes.
I do know, as of this second, I expect it to continue. Keep in mind, there
is a lot of repairing to be done. It is normal for the first move off a low
to be violent. If it continues, more resistance will be hit where you will
see pullbacks and better entries.

 

I did want to make note though, that underneath
the surface, it is starting to feel that the DOW/S&P-types are now feeling
tired out. It almost feels like the world is now ignoring the areas that HAD
been working in order to buy TECH. This is a complete flip-flop (no pun
intended) from the past few months. So…expect the NASDAQ to continue to
outperform for this second. “

 

“I believe the move that has been going on the
past few weeks is nearing an end. A pullback/consolidation/breather is
warranted and expected. This is not a long term call. This is not an
intermediate call. This is a short term call. I say this for several
reasons.

 

Major indices are now in the meat of resistance.
It would actually be healthy if the market pulls back, retrenches and then
moves higher. My biggest problem is that volume has not and still is not
powerful. I do not think the market can get legs without volume.

 

While more set-ups have been showing up, I still
see a ton of set-ups on the short side. I am not too sure that is a good
sign.

 

“I suspect a pullback is in order as the charts
of the Semis still have a ton of repairing to do. Repairing gets done
over time…not in days.

 

Just go a little slower here. I am looking and
hoping for better entries on light volume pullbacks. If volume picks up on
any pullback, that will be another story.”

 

 “The market’s tone, the market’s feel
and the market’s advance/decline figures continue to improve on a daily
basis. Pullbacks and corrections continue to be controlled and rotational.

 

For sure, the market is overbought on a near-term basis. But overbought or
not, keep an eye on the following resistance areas. (DOW 10,365…S&P
1131…NASDAQ 1920…NASDAQ 100 1436…SOX 399 ) A move above these levels
on a closing basis will be nothing but positive and give the major  indices
another leg up.

 

What hasn’t changed is
what I started telling you in late January. The tape is going to remain
challenging as this market remains split. While the numbers have improved,
only about 45-50% of all stocks are in good technical shape. If that does
not improve, it will have longer-term implications…but let’s
not throw cold water on the better action we are seeing right now.”

————————————————————————————————————————————

 

YESTERDAY was the first real pullback. It was
led by the DOW/S&P-types. The DOW has the feeling that it has topped out
on a near-term basis and has now made 4 successive lower highs. The rest
of the market went along for the ride.


 

I would put on the brakes right here. Yes,
there continues to be plenty of set-ups. The problem: THEY ARE MOSTLY
OIL-RELATED…and in case you haven’t noticed, OIL PRICES are now above
$48. I am on record that if OIL PRICES stay at these levels for a while
longer, I suspect a recession will be at hand  in the early part of next
year. I try not to predict but 100% of the time, OIL spikes have caused
recessions. We shall see how it plays out.

 

In one of my previous paragraphs, I stated
that I was still seeing a ton of short set-ups…even though the market
was rallying. Well, that number picked up yesterday and most of those
set-ups are about to break pivots…meaning lower prices for the weakest
of names. 

 

Lastly, pay heed to the paragraph in bold
type. I have said this several times since January. The fact that the tape
is going to remain challenging has not changed. 

Gary Kaltbaum