Bull Markets Can’t Be Hidden

  • August 26, 2002
  • Gary Kaltbaum

I am not saying the market gets
cheesed from here. I am not saying the market crumbles
like Ryan Leaf’s football career. I am saying that the market could
be ready for some sort of retesting
phase…and it would happen right where it
should…right at important resistance for the S&P 500.

I am harping on the five-year weekly chart because not
enough technicians are doing so.
Too many talk about today, yesterday, this week. That’s fine, but I
believe this market needs to be looked at in
the broad context of time because
of how horrid longer-term charts look. I believe it is important because
these bear market rallies continue to take the same form each time
one occurs. All you need to do at this point
is study March 2001’s rally and late
September 2001’s rally and compare it to the latest. They all look
alike. They all act alike.

If you miss the first few days, you miss about everything.
This rally started with a 700 point reversal day and a 500 point follow-through.
Talk about not being able to get
in soon enough.

As soon as the rally goes over the 20% mark, calls for a
new bull market are made. Your
emotions then drive you up a wall. Should I get in…should I wait…what
should I do? You see, I know what you are thinking because I am not
immune from those emotions either.

But, just when I need to, I get real. If this is the start
of another bull market, you just
can’t worry about missing some of it. There is one simple answer
to why you shouldn’t worry.

Bull markets last a long time and can’t be hidden.

It can’t be hidden because:

  • Leadership shows up in sectors and their underlying
    stocks.

  • The NEW HIGH LIST expands as breakouts pervade the air.

  • Breakouts pull back but don’t violate their pivots.

  • Your account actually starts to go up while long the
    market.

Getting back to the near-term, we are entering a
seasonally strong week heading
into Labor Day…so maybe we don’t break this second…but a few things
tell me to be a lot more defensive here.

  1. The fact that we bounced 1600 of the 2800 point drop
    tells me the rally is     long
    in the tooth.

  2. Put/calls and VIX/VXN are back to what I consider
    complacent areas.

  3. Major indices remain under their 200-day averages even
    with the big rally. World markets are in the same boat.

  4. Most sectors are still negative technically and below
    their moving     averages.

  5. CMGI…what? CMGI? Yes, CMGI! CMGI tripled in two days.
    First, I am     jealous I didn’t
    have any…but the more important point is that the     speculators
    are already out…only after a one-month rally. This type of     speculation
    usually occurs at the end of a move.

  6. Volume has been lacking all the way up.

Final message: I believe it is time to be more defensive.
I want to see how any pullback
takes shape before I begin to say whether we retest the lows or just
come down into the low to mid 8000s. Any retest gives the market a
chance to build a better base to lift off
from. The sawtooth patterns that have occurred off of every low just do not
hold…and yes, this latest rally is
a sawtooth pattern.