Bulls And Bears Are Both Right–Here’s Why
A few things stood out for me from
Tuesday’s action:
We were hoping the better A/D we had been seeing
on a daily basis was a precursor of better things to come…at least in the
short run. Tuesday’s action may have put the kibosh on things.
The horrible action in the BROKERS continues. We
believe the BROKERS are an important proxy for the market.
We believe the recent outperformance of the
FINANCIALS we have been telling you about may have ended. As always, we will be
watching this area closely.
COMMODITY stocks…which led the market
down…are at it again. They have been bouncing. The bounce may be over.
Tuesday was a distribution day for the market. A
distribution day coming so soon in an attempted rally calls into question the
durability of this market. A couple of more and see ya.
Major indices stopped dead into resistance
areas…some to the penny. Bulls will say it is normal to pull back here. They
are right. Bears will say that the charts are still very ugly. They are right
also.
Shorter-term, it looks like the market may have
hit a wall…but with all the recent gyrations, anything can happen. There is
starting to be a lot of noise out there. Be careful of the noise. It is amazing
that every time the market drops, we hear another rumor of a hedge fund getting
in trouble. Haven’t they floated that one hundreds of times in the past? You
would think some of the rumor mongers have read the book “The Boy Who Cried
Wolf.” How come when the market goes up, it is because things are good but when
the market goes down, it is not real?
Longer-term, our thoughts have not changed a
bit…and if recent lows are broken (which we don’t think will happen near-term
but eventually will), another leg down will ensue…and probably another vicious
leg down. Until then, we may be back in another nauseating trading range.
No matter what, we harken back to our main
thought we have had all year long. This is going to remain the toughest of tapes
to play. Take your time and keep close stops in place on everything. defense.Â
Gary Kaltbaum