Gary Kaltbaum is an investment adviser 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 click here or call 888.484.8220 ext. 1.
I could not help starting this report with some thoughts on the State of the Union speech because as you know, I have not pulled any punches on my thoughts of what this administration and this leadership is about. When I finished listening to the speech, the first thing I thought was that if I was in a coma the past year (and some think I have been) and I had just woken up, I would have thought this president was a conservative right winger who was a tax cutting, deficit hawk who wants to drill for oil and create nuclear power plants.
But we all know better… so a word of advice. Continue to pay no attention to what is said. Instead, just watch what is done. These people are experts at telling you one thing and doing another. It all started with them telling us how fiscally responsible they were and at the same time, immediately proposing and passing another $800 billion in spending that should have never been done. The latest comedy act is the proposed spending freeze which will freeze nothing AFTER raising OUR debt limit again and putting us in deficits for years to come. You would think election losses would stop politicians from continuing to try and insult American intelligence. Guess not! And just to be fair, the same Republicans that are blasting spending now, said nothing the past 8 years while spending went up markedly.
There was a reason I titled my last report “Correction Time” even though we were only three days off the highs. At the time, I thought there was enough “underneath the surface” deterioration combined with my thesis of a potential top in January to warrant it. Well, the action of the past week only confirmed my thoughts as the correction deepened… and in a not-so-thrilling fashion.
For starters and I have stated, FINANCIALS are gross. FINANCIALS topped out way in advance of this recent market top…which is not a good sign. Both ^GS^ and ^JPM^ are trading below the longer term 200 day moving average.
Leading countries like CHINA and BRAZIL are being smoked.
The SOX remains in freefall. The SOX has been a great indicator of the market since the mid-90s.
Good news is being sold… a characteristic that the market is under distribution. On Friday, the market opened hot on a strong GDP number. (More on that later.) Subsequently, the market sold the good news.
The NASDAQ is starting to lead down. The NASDAQ tends to lead up and down. It was not thrilling that MICROSOFT was sold down so hard off its earnings report after originally gapping up.
COMMODITY names have literally had a mini-crash indicating big money was just renting and not owning. NEW HIGHS have contracted markedly with only a handful left just a week or so below the highs of the market.
All major indices are now trading below the 50-day moving average…and showed no ability to rally after the first thrust down. In fact, Friday’s move took most major averages below near-term support.
Mutual fund cash is down to a paltry 4% meaning less ammo for the market.
For sure, the market is oversold but it was also oversold all week. Just remember, in bull phases, markets will stay overbought with the exact opposite for bear phases. I have no doubt that at any time markets can bounce. But it is my take now that bounces are to be sold instead of pullbacks being bought. I do believe the tide has turned and that won’t change easily.
As far as GDP of 5.7%… careful! 3% was a huge inventory build as most were preparing for a depression. When that did not occur, corporate America had to scramble to restock. This number will definitely come down. On top of that, one must realize how much was the government spending…which will definitely not last. I had told you months ago GDP will improve but you also need to know that GDP going forward will be below the norm of the past couple of decades. I do expect job creation to start showing up starting with this week’s number but nowhere near where it needs to be. The best news is that it looks like corporate America will not have to deal with an onerous health care bill that did nothing more than tax and mandate America into oblivion but chances are the maniacs are not done coming after us.
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.
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