Here’s What Reversal Days Tell You
The positive trend has not changed but in
the shorter-term, things are a bit muddled. Before I even start, please remember
the FED will be lowering rates this week as well as end-of- quarter window
dressing. Here are my thoughts.
Don’t get me wrong.
The technical condition remains fine. All major averages and most stocks are
still trading way above their moving averages…but that’s the problem
near-term. Trees do not grow to the sky…simple as that.
June 6th’s high
volume reversal day to the downside is still sitting there…and to show a loss
of momentum in the market, all one needs to look at is the lower level of NEW
HIGHS on last week’s bounce into new high ground. In fact, new highs dropped by
almost two thirds. All this tells you that the market’s move is becoming thinner
and more selective.
Bullish advisors are
at 60% and bearish advisors are down to 16%…not seen since mid-87. I am also
not excited that put/calls stayed at very low levels on Thursday and Friday.
This is in stark contrast to other pullbacks recently where the put side spiked
up.
BIOTECHS and HOMEBUILDERS
may have topped near-term. Take a look at Kaufman and
Broad Homes
(
KBH |
Quote |
Chart |
News |
PowerRating) and Centex
Corp.
(
CTX |
Quote |
Chart |
News |
PowerRating) to see what I am talking
about. Both these groups have led the market up. The good news is that this
near-term top is not a top out of weakness but out of strength. These groups
just got too extended.
But don’t keep your eye off the ball. Corrections are a normal process of a bull
move. Amazingly, so far, all corrections have been short and bought up with a
fervor. Until this changes, give the bulls the benefit of the doubt…and look
to buy the pullbacks.
Gary Kaltbaum
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