Just A Correction? Here’s The Whole Story
Well, having fun yet? I am going to write more often at this time. I am doing
that to make sure you know what to listen to and more importantly, what not to
listen to.
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Obviously, things have been gross. Now what? Very tough to say.
Markets do not go straight up…and do not go
straight down. So, expect some short-term bounces at any time. THAT WILL NOT
CHANGE THE TECHNICAL PICTURE AS A WHOLE. Please keep that in mind. All it
would be is a bounce into resistance after a bungee jump by most of the
market.
I do want to talk about a few sectors.
I told you the next to go was the OILS. Since that
call, OIL SERVICES are down 9% in just a few days…a big wow! I believe the
top is put in but could bounce. Of course, this group is prey for what OPEC
decides to do…but regardless, I believe the stocks are talking.
The only positive I told you about was the
TECH…specifically the SEMIS. Since, they have completely outperformed. You
need to watch this area closely as they have led up and down. I do believe
there will be more upside testing in the SOX but tons of resistance lie ahead.
Maybe a few % bounce is in order.
Question time!
“The market had another horrible A/D day on
Monday. I am hearing from a few people that these numbers have called a bottom
in the past. What do you think?”
Monday’s A/D on the NYSE was at least 10-1 to the
negative…again. The number is skewed by the many PREFERREDS, BOND FUNDS and
the like that have been crushed…but if they counted on the upside, they
count on the downside. There is a theory that when you see extreme numbers
like this, the market usually puts in a low. My answer…not a clue. Keep in
mind, we had poor A/D over a week ago…and that didn’t help. If the market
wants to put in a low, we will react to it. There is no use trying to predict.
I know there are some technicians that are saying that a u-turn is right
around the corner. I am not smart enough to know this. I remember Roger Healy
from “I Dream of Jeannie” had next week’s newspaper…today. He went straight
to the horse track. Give me that newspaper and I will tell you whether it will
happen. Â
“Are HOMEBUILDERS a buy here? Their valuations are
ridiculously low.”
Technically, there is nothing to do. Keep in mind,
HOMEBUILDERS have a direct correlation to the direction of interest rates. I
think there is a bounce in here somewhere…but I have no clue how to play it.
I do think it is a positive that an ANALyst downgraded them today…after the
drop.
“Do you think the recent market drop had anything
to do with the pictures being shown from Iraq?
Possibly…but no way of knowing. There is no
doubt the pictures are on investor’s minds, but I am not so sure decisions are
being made based on them.
“Do you think we have entered a new bear market?”
I believe many sectors are already in one…and
have seen their high for the cycle. Most pundits believe a bear market is
attained only after a 20% drop in the major indices. I do not want to be
holding stocks while that process goes on and then someone tells me we are in
a bear market. There is no doubt we are transitioning into one. Those who
believe this is JUST a correction are really not telling you the whole story.
I can think of many sectors already down 20%-plus.
Needless to say, the past few months have been
trying times for some. It does not have to be. SELL is not a bad 4-letter
word. As always, I will let you decide. It is your money.Â
Gary Kaltbaum
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