The Major Themes In This Market

  • October 28, 2004
  • Gary Kaltbaum

560 points down…280 up.
The DOW finally said enough was enough. This coincided with a couple of
events. First, Spitzer decided against criminal charges against an Insurance
Company and then OIL decided enough was enough…at least for this second. But
the DOW remains unimportant to me as underneath the surface, the themes I have
been talking about are coming to fruition.

 

TECH/SEMIS/INTERNET
continue to get the money flows.  I have been talking about their outperformance
but Wednesday’s action puts an exclamation point on things. The NASDAQ Had been
holding up in spite of the DOW hitting new yearly lows recently. How long it lasts
and how far it goes is anyone’s guess but for this second, the bullish action
continues. Let’s look at the NASDAQ.

 


Notice that on Wednesday, it broke above
the all-important 200 day average. It is now a smidge from breaking above
support at 1971. If there is any place to overweight this market, it is here.
  I also loved the “power” I saw in many names on Wednesday. This
power has been lacking for a very long time. It could be an indication that there
is much more to go in high-beta land but will take it day to day.   That
does not change my thought in other areas of the market I think you should avoid.
It is just a mess for many big-caps that refuse to get out of their own way.  
Other thoughts:   A move above 413 in the SOX and you will see another leg
up.

OIL may have put in a classic double top. Take a gander at the OIH. I
also believe the back may be broken for the price of OIL. If this turns out to
be true,  expect a further move down…and quickly as many traders are caught
long.

I still believe many base metals have also topped…STEEL, ALUMINUM COPPER
and the like. After their recent trashing, they bounced and now look
to be failing off the bounce.   As far as the “Spitzer” stocks
go, I don’t have a clue. There has been a relief rally after the recent bungee
jumps in INSURANCE and HMOs. Technical analysis is about reading the tape…but
with all the news, it is best to be a spectator.    

All in all,
no cold water to throw on the past 2 days. Just keep in mind what I have been
saying all year. The tape is very split and it is going to remain very challenging.
But for now, the bulls get their hand raised.

Gary Kaltbaum