Forget about the Financials, Watch the Sectors
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.
For the past 15 months, I have been telling anyone who would listen that the FINANCIALS were in a world of trouble. I have been telling everyone that these companies lied… these companies cheated… these companies hid losses… these companies used fantasy prices… these companies were paying the ratings services that rated their fantasy products. In other words, name the violation… and they committed it. Name the conflict of interest… and they were involved. After tens of billions of losses, one would think these people would learn from their mistakes. Then again, maybe they just don’t care as the violations they committed were the exact crimes Enron committed. Recently, we have read about Lehman recent suspect earnings… a glance at Lehman’s chart is indicative of something amiss. Now we have the following article.
Let me be clear about my opinion. These companies that are living by their own set of rules should clear out every person involved with this nonsense and start over. Imagine booking revenue gains as your business continues to head south based on more opaque accounting crapola that you yourself lobbied for. I do not understand why anyone would commit a dime of their money to these companies that in my opinion should not be running a lemonade stand… well maybe a lemonade stand in the nearest federal pen.
So…what has changed in the market? Not much. STEEL, COAL, OILS, FERTILIZERS, MINING, RAILS and a slew of large cap NASDAQ-types continue to lead. The NASDAQ a/d line continues to sit at all-time lows… signifying how narrow the move is. This is the same thing that happened last year. On the other end of the spectrum, the BANKING index is now into new low ground… in spite of all the calls to buy. On top of that, AIRLINES, AIR FREIGHT, AUTOS, BROKERS, GAMING, HOTELS, LENDERS, MORTGAGES, most RETAIL, RESTAURANTS, S&Ls and basically anything CONSUMER remain in bear markets… so we are seeing the same thing repeated over and over again.
As far as the major indices, I make note that the DOW and S&P are now lagging badly… especially the DOW which is tracing out an inverted cup and handle pattern. The good side of this is that small caps are now sitting with the relative bid for the first time in months. I am not sure if this is bad news or good news. The bottom line is that this is going to remain a tough proposition in my humblest of opinions. There are many calling for destruction here and many calling for a better second half. For me, it is more important to pay attention to sectors now… and leave the major indices to do their thing.
There are just bull and bear markets playing out side by side.