Here’s Why I Think It’s Different This Time

“The seas were angry my
friend…like an old man returning soup at a deli.”

George Costanza from “Seinfeld”

I have not used those
words in a very long time.
It is now time. Let’s recap.

The market is following my script to a tee…IT IS
BREAKING DOWN. Many are looking for a reason why. I don’t care. The market
does not care about today. It forecasts the future…which none of us
know…except maybe that guy who speaks to the dead.

Here is what you need to know:

The market did not just top in the past few days.
It has been topping over the past few weeks. I have been telling you that
underneath the surface, the internals have been deteriorating. Over the past
year, most flat days were accompanied by great advance/decline
figures…sometimes 2 to 1. Over the past few weeks, I have been noticing that
on flat days, decliners were leading advancers by 2 to 1…a stark change in
the market’s complexion.

The first to go was the TRANSPORTS as it broke
support:

The second to go…and it took time…was the
NASDAQ…especially the SEMIS. I have outlined this deterioration over the
past few weeks. The NASDAQ has broke support and violated its recent breakout
at 2000. Volume has been heavy on the down days and light on the up days…not
a good sign.

The NASDAQ 100 is actually weaker than the NASDAQ.

The SOX broke intermediate-term support at
491.(show charts) Many stocks in the group have performed bungee jumps…in
spite of all the analysts on Wall Street jumping over each other upgrading
them on a daily basis.

I do believe the SEMIS should be the first to bounce as they are way
oversold. A bounce in the SEMIS can happen as soon as today.

That leads me to the past couple of days. The DOW
and the S&P 500 have now topped. The DOW broke 3 month support on volume. Next
support is down at 10,000. The S&P 500 has support 1 point lower but doubt it
will hold.

Groups that have topped in the just the past
couple of days are PAPER, CHEMICALS, CYCLICALS, PHARMACEUTICALS…and possibly
FINANCIALS. Please remember what I have been telling you. Most people are back
to being “used to” a market that just turns back up and goes higher. This
time, I believe it is different. What was once a cold is turning into a flu. I
have no idea how long this lasts or how low it goes. I just know the least
path of resistance is lower. As always, if things start to change for the
better, I will let you know. You can’t hide good market action…just like you
can’t hide the ugly we are seeing right now.

Gary Kaltbaum