Following the Market’s Bread Crumbs
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 click here or call 888.484.8220 ext. 1.
First off, this is how I ended my last report:
“While we have not seen heavy volume in the market when it has moved up, we have not seen heavy selling when it moves down. Until I see the type of distribution I saw to get you out back in October, I am going to continue to play the good set ups. Let this all be a lesson to you that markets can move up on bad news. That is the definition of a better market. Bad markets leave bread crumbs on their trail. Until I see those markings (and as I said last time, that would be more than just one bad day) you should continue to have your eyes out on the long side. As always, if things change, you will know it.”
Well, we finally got some of those bread crumbs I have been telling you about as the market ran into a brick wall at very important longer-term resistance. As far as the major indices, a lot has changed. As far as the sectors, not much has changed.
As far as the major averages, if you look at the weeklies, we now have a major head and shoulders top for just about everything except the TRANSPORTS… with the added thrill of a failure at the 200 day moving average. This is a huge negative that indicates to me, notwithstanding oversold bounces, that the recent rally has ended. Before this week, I would have said that any pullback would be controlled. This was not a controlled pullback.
But for me, sectors are much more important because there are always bull nad bear markets side by side. Not much has changed in my sector analysis.
OILS remain very strong for obvious reasons. They simply started pulling back from their ridiculously extended and overbought conditions. Remember, everything eventually reverts back to the norm…and that is what is happening here. The same goes for the STEEL, METALS, COAL, MINING and RAILS. These are the areas I am going to watch closest as they pull into logical support and or moving averages. If they start to roll over badly, look out. If they can show they can hold support areas, I will look to be probing.
SOLARS remain in good shape… just a normal pullback into support after some frothy action. Many, like FSLR are now coming off moving averages. Again, I will be watching how they act at these support levels.
Lastly on the positive front, I also wanted to mention that GOLD/SILVER look like they are now coming up the right side of new bases here… and could be looked at on any pullback.
On to the negative front…and it is simple. The stuff that led down in the first leg of the bear market… are leading down again.These areas have lagged the recent rally and started breaking again in the beginning of the week. I start with the FINANCIALS. Not sure you knew Bank of America
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HOUSING, CRUISE LINES, HOTELS, RESTAURANTS, most RETAIL, AIR LINES, AIR FREIGHT, GAMING.
and just about everything CONSUMER have also rolled over. I would continue to stay far away from these areas. And in the case of names like Lehman… beware! They are still pricing their crapola based on their own opinions…and not the markets.
Lastly, oil prices. I had the long term thoughts correct… but in the past several weeks, every short term top I would call, would last a couple of hours to a couple of days. In other words, I missed the unbelievable persistence of the OIL move. I am not so stupid to make another short term top call… but I make note of one important thing to watch. OIL is now noisy… noisy as can be. OIL is on the front cover of everything… internet, national, local and everything else under the sun. It is being discussed everywhere I go and by every one I speak to. Add in the fact that I am seeing ridiculous froth in some OIL names that have zero revenues like an MXC which moved from $10 to $56 in days. I have taught you that this type of froth and noise do not usually happen at bottoms. I will be looking for a day where OIL is up a few dollars and closes down on monstrous volume. This would be the clue that the market has sucked in all the dumb money it can right at the top. Stay tuned!