A Full-Blown Bear? It’s A Possibility…

  • April 4, 2005
  • Gary Kaltbaum
 I believe too many
people are still harping on the “oversold” condition of the market
and not the more important part…that this market is in trouble. “Oversold”
is a short-term thing. The problem is the longer term.

The negatives:

Rallies have lasted a day or so. I have told you in the past it is easiest for
me to measure the market by how it bounces after a drop. So far…anemic…and
that’s being nice.

The NASDAQ/NDX remain the weakest area but no doubt, the DOW/S&P are playing
catch-up. I continue to believe that odds favor we have seen the highs in the
NASDAQ/NDX for this cycle.

More and more names and more and more sectors are turning negative. This past
week, RETAILERS may have topped. They had been acting well. There are some
good looking names left but one has to pause when looking at the charts of WMT
and BBY.

In that same vein, BROKERS looked to be topped
also. They have been acting just fine up until the past couple of weeks.

I have been saying that this action has the makings of last year…10% for
DOW/S&P and 20% for NASDAQ. A CLOSING break below these numbers and we may
just get it…DOW 10,368…S&P 1163 and more importantly 1150…NASDAQ 1968
and NDX 1458. Whether this turns into a full-blown bear is anyone’s
guess…but it is a distinct possibility.

I am always asked about what can stop a downward move. In this case, I would
love to see an INTRADAY break of support and a close back above on heavy
volume. This could wash out all the panicky sellers AFTER the drop. Keep in
mind, I am not predicting this…just a scenario I look for. Unfortunately for
the market, the exact opposite occurred on Friday as the market opened up hot
and sold off badly. This is just another negative in a market that continues
to come under distribution.

The positives:

All the positives are on a short-term basis 
Shorter-term, the market is due for an elusive bounce but keep in mind,
bounces are shorter-term. Keep your eye on the more important fact…and
that’s the fact the internals of the market continue to deteriorate. 

Gary Kaltbaum

 

 

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