Early Warning Signs I See for January, Part 2
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
syndicated radio show “Investor’s Edge” on over 50 radio stations. If you
would like a free trial to Gary’s Daily Market Alerts
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I was asked about my defense of Jack
Welch in my column yesterday. I do not have
to defend him. GE’s stock was up over 5000% during his 20 year tenure. That
speaks for itself.
Welch in my column yesterday. I do not have
to defend him. GE’s stock was up over 5000% during his 20 year tenure. That
speaks for itself.
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Well…I was hoping there would be nothing to write about for
the rest of the week. but Tuesday’s action warrants a missive.
the rest of the week. but Tuesday’s action warrants a missive.
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As I have told you, I have been worried about what happens in
January. I have been finding all kinds of early warning signs that have led to
near-term tops in the past. Whether those tops lead to something bigger is
another story. I have seen how the A/D has been about as anemic as can
possibly be considering the latest move. I have seen how the New High List has
been nominal at best considering the latest move. I have seen how the
all-important NASDAQ/NDX/SOX trifecta have been NOT keeping up with the
move. These are all negative divergences indicating the market is buying into
a select few bigger-cap names. Almost always, these types of divergences
ultimately lead to lower prices.
January. I have been finding all kinds of early warning signs that have led to
near-term tops in the past. Whether those tops lead to something bigger is
another story. I have seen how the A/D has been about as anemic as can
possibly be considering the latest move. I have seen how the New High List has
been nominal at best considering the latest move. I have seen how the
all-important NASDAQ/NDX/SOX trifecta have been NOT keeping up with the
move. These are all negative divergences indicating the market is buying into
a select few bigger-cap names. Almost always, these types of divergences
ultimately lead to lower prices.
Â
I have also seen how I cannot find a bear in sight…even
though the DOW is down for the year while the NASDAQ and S&P are up
nominally. It is almost never a good sign when just about EVERYONE is bullish.
The last piece of the topping puzzle would be the action in the major indices
themselves.Â
though the DOW is down for the year while the NASDAQ and S&P are up
nominally. It is almost never a good sign when just about EVERYONE is bullish.
The last piece of the topping puzzle would be the action in the major indices
themselves.Â
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On Tuesday, the market was yonked. I am already hearing not to
worry. Callers into my radio show said the drop was meaningless and on light
volume. I don’t buy it. If the market had not set itself up for a drop, it
wouldn’t have dropped. I would also be careful about thinking lower volume
drops are ok. Markets fall under their own weight. I have seen many times in
the past where markets continue to drop on light volume.
worry. Callers into my radio show said the drop was meaningless and on light
volume. I don’t buy it. If the market had not set itself up for a drop, it
wouldn’t have dropped. I would also be careful about thinking lower volume
drops are ok. Markets fall under their own weight. I have seen many times in
the past where markets continue to drop on light volume.
Â
The DOW has definite trouble at the recent highs. A break below
10,729 on a closing basis will lead to another leg down.
10,729 on a closing basis will lead to another leg down.
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The S&P has also hit the wall. A break below 1249 would be a
negative.
negative.
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The NASDAQ looks like it has a date with its 50 day average.
Notice how it wedged up last week after last Monday’s sharp drop.
Notice how it wedged up last week after last Monday’s sharp drop.
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The SOX has near-term support at 481…not far away. Notice how
the SOX really underperformed last week’s attempt to move higher.
the SOX really underperformed last week’s attempt to move higher.
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IÂ am not sure about the rest of the week. Normally, we should
see seasonal strength but you could have said that about Tuesday. If the
market fades this week and does not wait for January, it may be that much more
of a negative. We will just have to see. Watch those support levels I
outlined.Â
see seasonal strength but you could have said that about Tuesday. If the
market fades this week and does not wait for January, it may be that much more
of a negative. We will just have to see. Watch those support levels I
outlined.Â
Gary Kaltbaum