Here’s What Market Internals Are Telling Me Now
In the recent past, I
have told you that there was going to be less and less to do as fewer
and fewer stocks were setting up and more and more stocks were breaking down.
That is the simplest way I can explain to you why we continue to go slow. I am a
big believer in taking what the market will give me…nothing more…nothing
less. And right now, the market is not giving much.
Yes, I expect seasonal strength this coming week.
In fact, we will probably get a decent rally from here. It will be the week
after Thanksgiving that I am watching most. Yes, there will be money to make
going forward. Yes, there will be things to do, going forward. But one must
recognize when and when not to push the button. I hope you have been listening.
You are going to have to listen even more closely going forward as things get
tougher.
I am still not excited for many reasons but what
I said in the last paragraph is the most important reason. Price and volume
first…everything else second. Here are some other thoughts.
Breakouts are just not working like they were in
recent months.
Insiders are selling at a clip that has never
been experienced. Over 50-1 sells vs. buys. Insider action is usually a lagging
indicator by about 6 months. Thus, things can get interesting next year. I am
amazed by some commentary to not worry about this action.
This rally is already 8 months long. That in
itself is a problem. BUT…notice how the lion share happened in the first 11
weeks of this rally. In fact, the S&P 500 has hardly moved since mid-June. It
has been a small-cap affair.
Sentiment is still horrid. I have always believed
that the too bullish sentiment will eventually come back to haunt the market. Do
you know of any bears? I don’t.
“Good news” is no longer being bought. In fact,
the market sold off the monster GDP numbers as well as positive reports from
companies like Cisco
(
CSCO |
Quote |
Chart |
News |
PowerRating) and
Home Depot
(
HD |
Quote |
Chart |
News |
PowerRating). This is in stark contrast
to recent months.
Shorter term, the recent iffy action will turn
more negative if the major averages break below Friday’s low. The market would
then have its sight on Oct. 24th’s lows. I include the SOX in this. As you know,
the SOX has been a terrific indicator for the market. A break of last week’s
lows will test the recent breakout at 480.
Keep in mind, nowhere am I saying we are starting
a bear market or that you can start to go aggressively short. I still don’t
think that is in the cards just yet. BUT…if the market does decide to rally
off of this recent correction, I do believe that any rally will not have a lot
of power accompanying it as the internals are telling me the market is just not
ready for it.
At this time, my staff and I want to wish each
and every one of you a Happy and safe Thanksgiving holiday.
Gary Kaltbaum