Here’s What’s Happening Under The Surface
Nothing I have seen in
the past few days has changed my thoughts. In fact, the action only
confirms them. I have told you that for the major indices to not expect too
much upside or too much downside. That’s exactly what is going on.
BUT…underneath the surface, a lot is happening. On top of the groups I have
mentioned as have topped, you can now add the high flying Chinese and other
foreign ADRs that have cooked for the past year. I believe they are done,
cooked, basted and toast. Bounces are now sellable instead of pullbacks being
buyable. I also want to add that on top of GOLD and SILVER, I believe many
other COMMODITY-based stocks have now topped.
When I went through my scans on Monday, I found 2
lines of good looking stocks and 7 lines of poor looking stocks. I couldn’t
care less if the S&P and DOW broke to new highs. The fact of the matter is
that underneath the surface of the bigger indices, many stocks are topping. I
have discussed with you which groups to avoid…nothing has changed there.
Time to explain how tops work…they are
slow…they take time. Major indices can actually go to new highs.
BUT…underneath the surface, the average stock breaks support. The market
becomes defensive, thus money flows go into big-caps…thus holding up the
markets. BUT…eventually, as you pour more on more sand onto one side of a
see-saw, one side comes tumbling down. Maybe I am crazy, but so far, everything
I am seeing reminds me of topping action. Can it resolve itself back to the
upside? Sure it can. But that’s for another day. I am dealing with just today
and will react if something changes. This all fits in well with the bond market
cracking and nobody caring. Everyone…and I mean everyone says it is no
problem. Time will tell.
When you have some time, you may want to look at
the charts of these stocks…BRCM, GYI, WC, WIRE, GILD, FO, PWN, BHE,…and there were
a few more on you can add to the list from Monday. All these names failed on
their breakouts recently. They broke out and reversed the same day. This tells
me there continues to be a cloud hanging over this market technically. I am
taking my time here. You may want to also.
Lastly, here is a chart of the SOX.
I will say for the umpteenth time. The SEMIS have
led the market both up and down for years. If form holds true…let’s just say
that the bulls better hope the SOX puts in a low soon.
Gary Kaltbaum