These Are The Lists I Make Every Night
Every weekend and every
night, I make up lists. These lists include:
Stocks breaking out that day…stocks breaking
ABOVE moving averages…stocks breaking down…stocks breaking BELOW moving
averages…BUT more importantly, I make lists of stocks SETTING UP to break out
and SETTING UP to break down. This is how I measure the market. I do not measure
the market by the VIX. I do not measure the market by sentiment. I don’t measure
the market by opinion. I measure it by how many, which ones and what type of
influence stocks have.
RIGHT NOW…I am seeing hardly any
breakouts…hardly any stocks setting up to break out…many stocks breaking
down…and today…a ton of names SETTING UP to break down. Before you lick your
chops, keep in mind, anything can happen. My interpretations of the markets
occur on a daily basis…and I have seen things look very bad and then a high
volume reversal to the upside occurs…and then I have seen things very
good…and watch the market croak. My job is to just put odds in my favor by
recognizing chart patterns that have worked OVER AND OVER AGAIN…and to lose
the ego when things are changing.
So…that leads me to today. Of note:
The TRANSPORTATION INDEX has now sliced through
its all important 50-day moving average. Volume was heavy. THIS IS IMPORTANT.
The TRANSPORTS have led the market for quite a while…even with OIL prices
skyrocketing. This is another in a string of important recent breakdowns. I
would not ignore.
Many RETAILING names have topped. RETAILERS have
been leading but are now playing a little catch-up on the downside.
OILS continue to consolidate. Be careful about
buying OIL stocks here. They have had a long run and near-term, I believe much
of the upside is out. I am also seeing a bunch now trading below the 50-day
average for the first time in months.
HOUSING continues to be under distribution as
most names are now sitting below the 50-day average as volume patterns are
turning negative.
COMMODITY stocks are following my script as STEEL
and other areas have topped on volume.
The recent bounce in the market occurred on
anemic volume. In fact, volume declined on almost every day up. Friday’s action
should give you pause. Why? Even though major indices are a wee bit away from
breaking their recent important lows, I have found a ton of names that have
already broke the lows and a bunch more on the cusp. This means the average
stock is doing much worse than the indices.
Too many are talking about sentiment and oversold
conditions like they are the end-all be-all. Sentiment is important, but
sentiment is a secondary indicator. Secondary means secondary. Price and volume
action are PRIMARY. Furthermore, sentiment is much different in poor markets
than in good markets…so be careful. I know a few smart sentiment watchers that
started calling for a crash in 2003 because of the low VIX.
We are now entering earnings season. I will be
watching for the reaction to the news…not just the news and certainly not
opinion. I have been harping on the fact that ANALysts have been falling over
each other upgrading everything in sight…despite any good news…and if I hear
the word “trough” one more time from the SEMICONDUCTOR ANALysts, I will heave.
These ANALysts have been woefully wrong for years and if anything, I would fade
just about everything they say. I do not want to sound mean. I am really a nice
guy. If I had friends, they would tell you. It’s just that the same conflicts of
interest that were supposedly changed…are still around. Just about every
strategist is bullish and “buys” are outdoing other ratings by a wide margin.
When this market ultimately goes into a bear phase…a real bear phase, your
worst enemy will be the perma-bulls…so stay vigilant.
It is vital you watch support
areas…particularly 10,350 on the Dow (WHICH IS ALSO ITS LONG-TERM 200-DAY
AVERAGE) and 1163 on the S&P. These are definable areas that must not be
breached. 1150 is the 200 day average for the S&P. In order to extend recent
gains, the DOW needs to hurdle 10,568 and the S&P above 1192…where it will
come up against its 50-day average. I do not believe the market is going to give
up support levels that easily. WORLD markets are still in good shape…which is
one important positive that can hold this market up. As I have said, the U.S.
market is now one of the weakest markets in the world…which is not thrilling.
Gary Kaltbaum
