Just fine…but watch these divergences
Gary Kaltbaum is an investment advisor with
over 18 years experience, and a Fox News Channel Business Contributor. Gary
is the author of
>The Investor’s Edge. Mr. Kaltbaum is also the host of the nationally
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I want to repeat
some quotes from last week’s report:
"As far as the major indices go, as long as we continue to see a lack of
distribution days, I am good…but…
Shorter-term, things are extended. Stocks that have been leading this move like
the TRANSPORTS and miscellaneous FINANCIALS, have gone a wee bit parabolic. I
will not be a doofus and call for a pullback again…but I will say I would not
be surprised if we get one.
I have not been thrilled with the Advance/decline figures or the up/down volume
on a daily basis. In fact, they have not been even close to keeping up with the
market. Simply put, the market has gone big-cap. Big-caps have much more
influence on the major indices…thus the recent move.
I have not been thrilled that NEW HIGHS are much much lower today than the last
time we hit these levels. This simply indicates that fewer and fewer stocks
continue to participate. All of this could eventually come back to haunt the
market but until the major indices give way or distribution show up, continue to
concentrate on the sectors that have been leading."
Before I get into the previous paragraphs, here are the positives. It is a
positive that:
The NASDAQ
(
COMP |
Quote |
Chart |
News |
PowerRating) broke above the 2200 level and is now actually at
yearly highs.
The NDX
(
NDX |
Quote |
Chart |
News |
PowerRating) remains above its recent breakout.
The TRANSPORTS continue to roll.
The DOW
(
DJX |
Quote |
Chart |
News |
PowerRating) finally broke above resistance…but is still shy of the
yearly highs.
MID-CAPS broke to new highs.
WORLD MARKETS are rolling…with Japan sizzling.
No complaints about the major indices…none at all.
I just would like you to keep referring to the first few paragraphs from this
report. If nothing changes, it will set up a huge divergence…probably in the
early part of next year. This is the same type of divergence that stopped last
year’s year-end rally. Basically, what is occurring is the mega-caps are finally
getting a life. These stocks have a major influence on the major indices. The
GEs of the world are finally catching a bid. Names like MSFT
(
MSFT |
Quote |
Chart |
News |
PowerRating) (which
is 14% of the NDX) are also helping. Underneath the surface of this big-cap
move, fewer and fewer names are participating. We will see soon enough how this
will play out.
This does not take away all the powerful action we are seeing in the stocks that
are working. In this environment, I would continue to play the high volume
breakouts and the low volume pullbacks as they occur.
Gary Kaltbaum