Extended Markets
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.
Greetings from Prague where I can guarantee you there is no global warming. Heading to Paris and Normandy next. Wish you were here.
Like a broken record, I will continue to say that markets are stretched and extended to the upside. But I have been saying that for several weeks. The important point is to recognize stretched and extended conditions can last for a while. Just like we saw stretched and extended to the downside in the two big bears in the past decade, we are getting another outlier event but this time to the upside. So…bottom line, until high volume selling comes in, it is important to do your best to stay withe the trend but I must outline for you the repurcussions of this type of market.
Stocks sectors and markets are supposed to build bases/trading ranges on the way up. This enables pullbacks to find support levels that can be leaped off of. Typically, the big money is a defended of things at the 50 day/10 week moving averages on pullbacks. The ultimate problem with stretched and extended markets is that when real selling does show up, it tends to be vicious as there is no underlying support as things have gone too far, too fast. I am not telling you this because things are in trouble. I am telling you this because from my studies of bulls and bears, this is how things work. Extended markets lead to excessive bullishness and low cash levels. Once selling starts, there is very little ammo left to stop the selling. So just beware.
So far, the market has been fine. There are not many areas breaking the important moving averages…maybe COAL and a few others. That will certainly not kill a market. And when two important areas like retail and transports were getting into trouble recently, they held and turned right back up. This is the type of positive rotation that has kept the market in good stead. As long as we continue to see positive rotation and more importantly, as long as we continue to see bad news actually bought, market will be fine. But I have my eye out for soaring brent crude and commodity prices as well as the extreme bullishness and extended markets. Of course, markets continue to have QE2 on their side…and of course, just ask Ben,, there is no inflation. I am noticing futures way down this morning. But keep in mind, markets had a bad down day a few Fridays ago at the outset of the Egypt news…with markets rebounding easily. Markets will need more than one bad day.
I am going to have an opinionated report backed up by facts and numbers on the deficits and the recent budget proposals over the weekend as the scam by both parties continue…all at the expense of you and I. I am hoping you remember it is 300 million of us versus 535 and an administration run amok. I will give you just the facts.
Gary Kaltbaum owns Kaltbaum Capital Management, LLC (“KCM”), an investment adviser registered with the U.S. Securities and Exchange Commission. The opinions expressed herein are those of Mr. Kaltbaum and may not reflect those of KCM. The information offered in this publication is general information that does not take into account the individual circumstances, financial situation or individual needs of an investor. 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.