95% Of The Crowd Was Bullish…What Does That Tell You?

  • November 8, 2004
  • Gary Kaltbaum

And to think that 9 days ago, the DOW was sitting at new yearly lows.

 

I have heard everything from the NASDAQ is going to double from here and the
DOW is going to skyrocket to…this latest move is a trap. It’s kind of like
listening to the Republicans and Democrats…looking at the same facts but
interpreting them completely different.

 

It’s a positive that the S&P 500 has broken out of a ten month base to new
yearly highs.

 

It’s a positive that most mid-cap and small-cap indices have moved to new
highs.

 

It’s a positive that UTILITIES and TRANSPORTS continue to act well. I am a
little wary about UTILITIES though based on recent BOND action.

 

It’s a positive that the New High List has expanded markedly this past week.

 

It’s a positive that all major indices are now back above their short-term and
long-term moving averages.

 

It’s a positive that volume has expanded into this move.

 

The worst thing I can say about the technical condition of this market is
that it is overbought in every way, shape and form. Price is extended and
sentiment is extremely bullish. During an appearance in Phoenix this
weekend, I asked the large crowd whether they were bullish or bearish. 95%
of them were bullish…hmmm! But to get this overbought, the market had to
have a big move…and that’s a positive. I actually believe it to be bullish
to get this overbought. Too many get too caught up in the short-term
overbought conditions and forget about the great improvement in the market.
Do not fret any short-term pullback…and yes, I wouldn’t bet against
one…and real soon. The main difference between the overbought conditions
throughout this year and today…is the marked improvement in the charts. If
you are looking for a great entry on the S&P, it would be on a pullback into
the 1145-1150 area.

 

^next^
Other notes:

 

It should be quite obvious that money is now flowing into the big-cap areas
that have not been working all year. I believe this will continue as names
like GE, DELL and others are JUST starting to break out. On the other end,
be careful about buying those stocks that have already had a move and are
extended. I suspect money may start to flow out of them as we saw on Friday
in names like GOOGLE and RIMM.

 

I believe REITS have topped for the near-term. I would not buy a share of
this group right now.

 

I believe BONDS may have topped here.

 

I believe GOLD looks higher as the DOLLAR continues to wither on the vine.

 

Continue to watch the daily action and not worry about all the “GRAND” calls
that are being made on a daily basis. For the bulls, let’s hope recent
positive action continues.

Gary Kaltbaum