Another One for the Books (Almost)
Gary Kaltbaum is an investment
advisor with over 18 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
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888.484.8220 ext. 1.
Two weeks ago, on TV and in this report, I stated that the dollar was
bottoming for the near-term. This was based on the fact that 97% of traders were
negative on the dollar as well as the technical condition. Here is the chart of
the dollar. I would love to give you a reason for the rally…that things were
better….that the economy was on sound footing…but I can’t. Let’s just say
the dollar is rallying because it was ready to.
Right after BAC injected a few bucks into Countrypuke Financial, I stated
that Countrypuke was headed into single digits. Add Washington Mutual to that
thought. After looking at their numbers, I believe single digits are in the
offing and maybe worse. I suspect someone big to come to the rescue but not at
premium prices. Speaking of Countrypuke, have you seen their new TV ads claiming
how much they care about the borrower? Where were they when they were supposed
to do the right thing? Oh yeah, they were lowering the bar as far as it can
go…issuing a zillion interest-only, no down payment loans to people who could
neither afford the house or afford to pay off the mortgage…while the “tanned
one” sold off $150 million of his own stock.
That leads me to the following chart. Merrill Lynch put this out in the past
week literally calling it a 100% chance of recession in 08.
I will not quibble with this chart but I think the more important charts to
look at are in the RETAILERS and FINANCIALS…that continue to be klonked…
and the DEFENSIVE recession-resistant issues like Coca Cola and Proctor &
Gamble continue to soar. As you know, I believe the market is the best
forecaster…AND THIS MARKET IS DEFINITIVELY screaming major slowdown or worse.
CITIGROUP was applauded by some for putting $50 billion worth of crap back
onto their balance sheet. Funny, I heard no one blasting them for having this
stuff off their balance sheet in the first place. If this was not CITI, we would
have already seen perp walks. And I must tell you, the new CITI CEO would have
made me sell the stock if I owned the stock…horrible interviews.
Nothing has changed in the market. The problem for this market is that 70% of
the market remains in a bear market. I know many are hemming and hawing that the
DOW is still up this year…and how strong the NDX has been. Once again, they
are not good examples of what is really happening. The NDX and NASDAQ have been
leading but the A/D remains at ALL TIME LOWS. Again, a select few megacap names
like AAPL, MSFT, GOOG, BIDU, CSCO, ORCL, RIMM and a few others have led the way.
In fact, the top 8 stocks in the NDX make up 50% of that index. As far as the
DOW, it always holds up best when markets get into trouble as money flows into
the most liquid mega-cap names in the market.
I repeat for the hundredth time. BANKS, REGIONAL BANKS, MONEY CENTER BANKS,
S&Ls, HOUSING, BROKERS, LENDERS, REITS, RETAIL, HOTELS, RESTAURANTS, AIRLINES,
TRUCKING, INSURANCE, AUTOS, AIR FREIGHT, SEMICONDUCTORS and many other
sub-groups remain in their own private bear market…some in brutal bear
markets. This has been going on all year long. I also repeat my theme that small
and mid-caps continue to woefully underperform the large caps. One glance at the
RUSSELL 2000 versus the DOW speaks volumes.
As I have stated, I am not as much worried about December as I am January.
January has been a month where markets top many times in the past. This market,
as well as most world markets, is heading into January with about the worst
technical condition I have seen in a long time. About all the market has going
for it is that the worst areas could bounce and the things that are still
working could try and ramp. The problem…from my studies of past bear markets,
I have never seen this type of technical condition where the popular indices DID
NOT follow the average stock. If this market does hold up, it will be a first.
That said, there are intermediate levels I am watching to tell me major
indices could be headed back to lows. DOW 13,237…S&P 1460…NASDAQ 2613.
Markets are headed into what should be seasonal strength in the next week. I
would not doubt bounces into end of year. Until things change, any bounce will
not change the technical condition of this market.
Gary Kaltbaum