Don’t Jump The Gun–Here’s Why
When you have a chance, take a look at the SOX as
it has now moved through near-term resistance. I also know whenever the SOX
breaks above an area, it gets going quickly because it is a hot money sector.
I gather the shorts squirmed also. We are also seeing a little better action
in the INTERNETS as EBAYÂ finally showing positive accumulation. It took a 48%
drop to get there. GOOG is obviously the best name with YHOO needing to vault
$35.91. CTRP also has a nice mid-level pattern going. In the SOX, best looking
names are MSCC, FSL, IRF, NVDA, MRVL, VSEA, DIOD but most everything is coming off
the lows. This will probably lead to near-term outperformance in the
NASDAQ-types. In fact, we believe that even if the DOW/S&P break their
lows (more on that in a minute), we expect the NASDAQ/NDX to hold their lows.
One note…pay no attention to Friday’s NASDAQ new highs as there were a ton
of illiquid NASDAQ stocks with crazy prints.
We bring these areas up first because that’s about
all the good we are seeing in the market right now. Here is a little
breakdown (no pun intended) of the important areas.
THE DOW 30… Technically, there is not one stock I would buy in the DOW 30.Â
There are a few strong names but no bases to buy off of. BA is strong but
extended. INTC has been strong but is now at resistance and is overbought on
price near-term. MO is sitting in a sound high base. GE needs to get above
$36.61. UTX needs to move above this base its been sitting in for a while.
After that…blah! The DOW now has a chance to break recent lows. Expect
another vicious sell-off if that occurs.
The S&P had been strong but the weakness in COMMODITY/INDUSTRIALS have put an
end to its relative strength. It too can break recent support if it wanted to.
TECHS will help though. A break below 10,000 on the DOW and 1136 on the S&P
would not be thrilling for the bulls.
^next^
THE TRANSPORTS…Amazingly, the best looking names are AMR and CAL. After
that…gross! TRANSPORTS now look like they can break recent lows also. Another
break occurs at 3335. Dow Theory anyone?
Maybe 3 out of 10 stocks are in good technical
shape. Even when the market recently bounced, the numbers did not get much
better. As you know, this is my #1 indicator as it digs deep into the market.
Ditto for group action.
WORLD MARKETS continue to be under pressure.
HMOs and HOSPITALS are now toppy here. They have been leading. The MEDICAL area
has been a major port in the storm recently. There are not many groups that
remain in good shape. You can add these groups to the list of potential tops.
UTILITIES just broke the short-term 50-day average for the first time in about a
year. This is an important break for what we believe to be an important
group.
ENERGY/OILS/COMMODITY/INDUSTRIALS/METALS/GOLD…Just an absolute bloodbath now
going on in these areas. They are very extended and oversold on price but will
be shortable on any bounce into resistance. We are almost stunned at how deep
the drops have been in these areas. The NEW LOW LIST is now littered with these
groups.
With the potential for an outperforming NASDAQ,
we wanted to throw out a potential scenario for you. The DOW/S&P break support
with all major indices but the NASDAQ/NDX does not confirm. This is a positive
divergence. Everyone panics into the breakdown leading to a near-term bottom
and further strength in TECH. The reason I bring up a scenario is because of
the positive divergence along with the absolute horrid action in the NYSE. Maybe
we will just have another split except this time NASDAQ/NDX/SOX outperforms
while everything else gets cheesed. Just a scenario!
We are still in no mood for longs…even with the TECH bid. If the rest of the
market breaks, they will pull back for better entry. Volume patterns have turned
poor once again and still not seeing many sound bases to buy off of. There is
simply no reason to jump the gun here. We have seen several failed breakouts in
the past few days…which tells us to take a step back.Â
Gary Kaltbaum
Â