Here’s The Kind Of Bounce I’m Expecting
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. If you
would like a free trial to Gary’s Daily Market Alerts
click here or call 888-484-8220 ext. 1
To all our friends in the Louisiana, Missisippi areas as well as any areas in
the wake of Hurricane Katrina…GET OUT! Please get out and stay safe.
Before we get into talking about the markets, we wanted to talk a little
GREENSPAN today. As you know, we used to be big fans of BIG AL until we
realized the he was "less than meets the eye." We believe he has done more
harm then good and also believe this economy and the markets would be better
off with a less intrusive FED HEAD. Our biggest problem has been one-fold. WE
BELIEVE ALAN GREENSPAN IS NOTHING MORE THAN A TREND FOLLOWER. The latest…on
Friday, he decided to talk about the potential for a housing collapse.
Wow…what a genius! He figured that all by himself. Let’s see…for months,
Big Al said to not worry about HOUSING and that it was nothing more than a
regional issue. Now…after the move has already been made and after the
psychic lenders have lowered the bar to the lowest possible point, he is now
worried. Thanks Al. Why not prick the bubble with your rhetoric instead of
letting the market forces deal with it? Why? Because Alan Greenspan created
the credit bubble. You see, he decided to lower rates down to zero. He turned
the house into an ATM. Tens of billions of dollars have been taken out of
home equity because of these lower rates. And because of the lack of
affordability, lenders are giving away money to people who should not be at
risk. Way to go Big Al.
Nothing we have seen in the past couple of days change our more defensive
stance. In fact, we believe you may want to become more defensive. To recap:
Every major index is now trading below their shorter-term moving averages as
well as the support areas we have outlined. Support has now become resistance.
More and more leading sectors have had near-term breakdowns…and more
importantly, have shown no inclination to bounce. We have outlined these areas
which include RETAIL and HOUSING.
Volume has been heavier on the down days than the up days. Very simply,
distribution has been creeping into the market.
For the S&P, we would keep your eye on the 1195 area, which is the 200 day
moving average. We have always used this longer-term moving average to define
whether a certain area is in positive shape or negative shape. A move below
for this broad based index is a huge negative. The next support level would be
in the 1190 area.
The DOW continues to be the weakest of the major indices. It is now trading
below all moving averages because of the gross action in mega-cap names like
GE, C, DD, MMM and others. 10,250 is the approximate next support.
The NASDAQ is now trading below its 50 day average…and to be blunt, it is
vital it holds the 2100 breakout.
Lastly, the small and mid-cap areas are now tracing out inverted cup and
handle patterns. A break below the areas they are sitting on right now…will
only lead to lower prices. They include the Russell 200 and the Mid-cap 400.
We would be watching these areas closely as they have led for a long time.
Shorter-term, it doesn’t take a rocket scientist to figure out the markets
are oversold here…not only in price but we are starting to see it in
sentiment. In fact, the put/call figures spiked up just below extreme levels
on Friday indicating investors starting to get very worried here. So, there
is potential for a bounce soon…BUT…we expect any bounce to be of only
"B" to "C" quality. We say this because there have been too many stocks
breaking down over the past few days. At the very least, they will need time
to repair.
Gary Kaltbaum