Eleven Observations About This Market

  • March 10, 2003
  • Gary Kaltbaum


And you thought this was going to be easy.
Very simply, on Friday the market reversed the reversal from Monday which
reversed the reversal of 2/25 which reversed the reversal which held the
reversal of 2/13…which means we are basically right where we were since the
reversals started to reverse. I guess you know by now why Prozac sells so well.

I have lots to talk about today.

Longer-term, nothing has changed. I won’t bore you again with the details. Just
go through most of my reports of the past two years.

Shorter-term, there are some positives…of course, unless a reversal reverses
the reversal.

  1. The markets are
    still holding the July and October lows. That’s 33 weeks of holding the lows.
    Since the bear market started,  the market has never put in time repairing the
    damage at a certain level over a decent period of time. Maybe all this
    retesting ultimately will be good. As of right now, it has not done much to
    get the long side excited. And let me say this…if the major indices ever
    break the July/Ocober lows, then game over. The black hole opens up once
    again.

     

  2. The low end of
    this base the market is in is higher than the July/October lows. Maybe…just
    maybe, the market is trying to build a higher low.

     

  3. Sentiment is
    turning more bearish by the day. Just remember, the wrong-way crowd needs to
    get as bearish as possible to turn the market…hence the term “wrong-way
    crowd.” Let’s just say it is about time…but unfortunately, not at extreme
    levels just yet.

     

  4. Friday’s reversal
    was to the upside. Positive reversals usually lead to more upside testing.
    That was the third upside reversal in a month. It tells you that decent
    support lies underneath here. Mark down 818 on the S&P as the first little
    support…Friday’s low at 812 and then February’s low at 806. A good break of
    these levels and you will see July/October lows.

     

  5. GOLD is completely
    breaking down.

OK…that’s the
positives. All the problems I have outlined for you as a technician are still
there.

  1. There remains an
    absolute lack of leadership in this market. The number of negative groups
    continue to outweigh the positive groups and by a wide margin. In fact, I
    can’t find one group where a whole bunch of names are breaking out.

     

  2. Leading stocks
    ultimately break down.
    (
    BHE |
    Quote |
    Chart |
    News |
    PowerRating)     and
    (
    HAR |
    Quote |
    Chart |
    News |
    PowerRating)     seem to be the latest names.

     

  3. New lows were hit
    in WORLD MARKETS. As of Friday, the NIKKEI broke below the support I outlined
    for you a couple of weeks back and EUROPE followed suit.

     

  4. A clear lack of
    bases remain. In fact, most charts look like a three-year old scribbling on a
    piece of paper. The most important factor for me in determining whether the
    market had a chance for a “real” rally would be a ton of charts tightening up
    in quality bases and then breaking out on huge volume. I don’t believe the
    market has started the process yet.

     

  5. Insiders are still
    selling shares at ever-lower prices. Insiders continue to ignore their own
    stocks as buying remains nominal. In fact, insiders are picking up their
    selling in TECHNOLOGY shares. Food for thought.

     

  6. More and more
    strategists are calling the July/October lows…the low. That scares me. The
    latest is a gentleman by the name of Steven Leuthold. He was written up in the
    New York Times this weekend. Hopefully, he is right. Mr. Leuthold, I
    believe has a good track record. But my new favorite is Robert Froelich, who
    was on TV last week. Of course, Mr. Froelich has been bullish all the way
    down…but still gets invited back on the tube. Of course, he has to stay
    bullish. He is the chief strategist of Scudder…a mutual fund company…who
    needs you to buy mutual funds. I almost heaved when he said the fundamentals
    of the market are the best ever. Yes, he said the fundamentals are the best
    ever. I guess he has been doing the Rip Van Winkle dance. I guess he has
    fallen asleep as earnings have dropped precipitously and growth of earnings
    have become non-existent. Has he looked at Home Depot’s
    (
    HD |
    Quote |
    Chart |
    News |
    PowerRating)     flat numbers?
    Has he looked at McDonald’s
    (
    MCD |
    Quote |
    Chart |
    News |
    PowerRating)     earnings down 26%? Has he looked at
    Citigroup’s
    (
    C |
    Quote |
    Chart |
    News |
    PowerRating)     down 1%? Has he looked at some of the numbers coming out of
    Techland? Has he looked at the airlines lately? Has he looked at the travel
    industry? Has he looked at job loss? Has he looked at the consumer petering
    out? Has he looked at the price of oil? Those are fundamentals.

    No, he would just rather give you a line. Amazingly, after being wrong
    throughout this whole bear market, he also went on to say that Warren Buffett
    was wrong about his latest comments and maybe Mr. Buffett needed to look at
    the market a little closer. I swear he said this. Shame on him. I believe he
    should be banned from the media for putting out such crap month after month to
    an unsuspecting public….and  where was  Mark Haines of “Squawk Box?” There
    was not one follow-up question to this ridiculous rhetoric…but actually, I
    think Mr. Haines may have  been too stunned by the comments to ask anything
    further. By the way, this is my first complaint of Mr. Haines. I believe he
    does a fabulous job in a very tough environment. But…Mr. Froelich has been
    on TV every month calling the bottom and is not being held accountable. Now he
    is. It is OK to be wrong. It is not OK to throw BS at the public. This is not
    a personal commentary. I am sure he is a wonderful man. This is just business.

Back to our regular
programming. What to do? How about nothing? More importantly,  things look like
they are about to happen in Iraq and frankly I have not one clue how the markets
are going to react . Every genius is out there saying the market will go up 1000
points when we win the war. Well, if the smart money believed that, why wouldn’t
we  already be up 1000 points? Now that’s a question to ponder.  I hope the
masses are right on this one, but since when have the masses been accommodated
lately?

Continue to go slow. The markets are continuing to play pickpocket on whoever
tries to go long. Yes, you can trade and make money. But for the intermediate-,
and for that fact, the long-term investor, it is a vast wasteland. Add in the
potential for war in the next two weeks…and maybe it is time to hit the golf
course.

Â