Gary Kaltbaum is an investment adviser with over 25 years experience, and a Fox News Channel Business Contributor. Gary is the author of The Investors Edge. Mr. Kaltbaum is also the host of the nationally syndicated radio show “Investors Edge” on over 50 radio stations. Gary is also editor and publisher of “Gary Kaltbaum’s Trendwatch”… a weekly and monthly technical analysis research report for the institutional investor. If you would like a free trial to Gary’s Daily Market Alerts click here or call 888.484.8220 ext. 1.
Commentary for August 30, 2010
Ben Bernanke cannot influence the economy. We are no longer in the past where the Fed waves their magic wand, lowers rates and everything will be better. Mr. Bubble has rates already at zero…making banks flush while screwing savers. Mr. Bubble has already used tons of funny money to buy a massive amount of bonds to bring long rates down.
There is nothing he can do to create demand. There is nothing he can do to stop people from saving. There is nothing he can do to stop people from paying down their credit cards. Simply put, there is a cultural shift going on because the financial crisis scared the heck out of people. The economy is still blah and housing remains in the basement. I would say the only thing housing has going for it is that TIME MAGAZINE now has a front cover entitled “RETHINKING HOMEOWNERSHIP!” So maybe…just maybe…nah! The only think Mr. Bubble can do is move markets every now and then. More then than now.
As far as the market, it has held A low. Notice I capitalized A…and did not say THE low. To be clear, a break below recent lows, WHICH I BELIEVE ARE VITAL SUPPORT LEVELS, then expect some real vicious technical selling to show up. So here are those important levels. NASDAQ at 2100 which held to the penny…S&P at 1040…which held to the penny…RUSSELL 2000 at 580-587 which held by a smidge…SMALL CAP 600 at 316. And very importantly, go look at the IYF and XLF which are ETFs for the FINANCIALS.
Notice both held right at the yearly lows. You will know market is toast if they break below. IYF under $48 area and XLF under the $13 area. The RKH which is REGIONAL BANKS broke lows recently and is much worse than the bigger banks. I expect every one of you to study these charts.
Notice I did not mention the DOW. Again, the DOW always holds up best when market is correcting as investors who have to be fully invested park money in the largest and most liquid stocks in the market. Thus, I pay attention to the DOW but give less weight. It is not representative of the whole market.
My best guess is this low holds for now. After all, it is end of month window dressing time…but of course, none of that goes on because it is illegal. Yeah…that’s the ticket! I would be surprised with any other outcome before the holiday. After the holiday could be another story as September is the worst month of year. But don’t get all comfy that the market will be cheesed in September. The market has a way with screwing with everyone. Also, look at the BOND MARKET. There has been a direct inverse relationship between bonds and stocks. There is a chance the recent action in bonds is a near-term top from its recent parabolic move.
I am looking at the market two ways here…as a big sell if the market wedges up into resistance which would mean a ton of names would do the same. On the other end, there has been a decent amount of stocks that held the 50-day on this dump to the downside. Actually, not sure if 100 names in the whole market is a decent number. And there are about 15-20 growth leaders still showing amazing strength though many that used to be strong have gone by the wayside. On the upside, I am going to be watching how the market reacts as it gets near the 50-day average which is only a couple percent higher. The 50-day ominously remains below the longer term 200-day. In bull phases, it is the other way around.
To sum it up, market held very important support. It is a potential low…and could be the low. Playing it by the book, the market will need a follow through day from here..We will know if a low is in by simply seeing the market continuing to hold and leadership breaking into new high ground AND STAYING THERE. It was good to see volume heavier Friday so maybe good things can happen. At least, for the first time in a while, I am open to it. But the mantra will stay the same…this market is going to remain a tough proposition whether it is bouncing up or sinking like a stone…so be patient.
Disclaimer: The opinions expressed herein are those of the writer and may not reflect those of Wunderlich Securities, Inc. or any of its affiliates. The information herein has been obtained from sources believed to be reliable, but we cannot assure its accuracy or completeness. Neither the information nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Any reference to past performance is not to be implied or construed as a guarantee of future results. Securities offered through Wunderlich Securities Inc.
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