If the market hits new highs, here’s what I expect next…
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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The market and many of the worst sectors are
oversold. I would not bet against a further bounce. I say this because
put/call figures have spiked up…but more importantly, I say this because of
how extended in price the worst sectors have been to the downside. It is
normal for those areas to do some corrective bouncing…and this is as good a
time as any. These areas are the same ones I have been talking
about…RETAILERS ,GAMING, HOUSING,
RESTAURANTS and most consumer areas.
But…that’s just the short term. Longer-term, the
market has issues. I am just seeing too many negative divergences.
The NEW LOW LIST has expanded. In fact, Thursday’s
number was the highest in months.
The NEW HIGH LIST continues to contract.
Fewer and fewer stocks are participating. Fewer
than 5 out of 10 stocks are in good technical shape.
Monetary indicators are flashing red as FED FUNDS
are now approaching 10 year yields.
More and more blow-ups are occurring on a daily
basis. You just don’t see so many blow-ups during bull markets.
About the only sectors in good technical shape are
GOLD, METALS, OILS, ENERGY,
BROKERS, UTILITIES, HMOs, RAILS, INSURANCE, BIOTECHS…and
that’s about it. Of note: I do believe OILS are ready to pull back in a more
meaningful way as OIL prices feel like they want to pull back this second.
Also, I believe BIOTECHS are now starting to feel toppy and should be waited
on at this point. All this and the S&P is only 2.5% off the highs.
These types of negative divergences almost always
come back to haunt the market. It is classic late stage action. But for a more
serious decline, pay attention to these near-term important support levels:
DOW 10,350…NASDAQ 2093…S&P 1200…RUSSELL
645…NDX 1551.
So…let me be clear. Even if the major indices
move to new highs (and I believe odds do not favor that this second) this
market is classic late stage action. Stay on your toes.
Gary Kaltbaum