Kaltbaum: Big Caps Lead the Way
Gary Kaltbaum is an investment adviser 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. Gary is also editor and publisher of “Gary Kaltbaum’s Trendwatch”… a weekly and monthly technical analysis research report for the institutional investor. If you would like a free trial to Gary’s Daily Market Alerts click here or call 888.484.8220 ext. 1.
The market experienced a follow through day last week putting the market back into a confirmed rally. Never argue with this important technical characteristic. That said, I think it is important to talk about what is going on underneath the surface that may have to be dealt with down the road.
The market is becoming narrower with some glaring divergences…namely the SMALL CAPS. While the DOW is at new highs, the RUSSELL 2000 and SMALL CAP 600 are still below the 50-day…amazingly so. This tells me that it is going to get tougher going forward and that one needs to concentrate on the larger names. This is the type of action that usually occurs at the latter part of a move…so be on guard. That said, I doubt there will be any major “market” problems until the New Year as we are entering a seasonally good period. Of course, if that changes, I will let you know…
We are seeing a lot of secondary and a heck of a lot of insider selling. Obviously, we would rather not see this.
NEW HIGHS have contracted markedly, especially on the nasdaq where in October, the highs were near 250 where this week, with the NASDAQ near highs again, they were only about 50…again indicating a narrowing market…which again is an early warning sign.
Volume has been perplexing. I do not think I have ever seen so many light volume up days and heavy volume down days without the market crumbling.
Couldn’t continue without mentioning the DOLLAR. It looked like it was ready to rally above the 50-day this past week where it has been held below since March. Friday, it cracked again. This must continue to be mentioned because the dollar topped March 6th…the market bottomed March 6th…a direct inverse relationship. As long as this link continues, we must watch like a hawk.
So…some issues to deal with but not just yet. The market remains fine with a few chinks in the armor. Major averages are back above support and/or moving averages and it seems that this dollar/market link will continue.
OIL STOCKS, for the most part, pulled into the 50-day…where they will probably bounce off of. I do want to let you know a few OILS have broken down near-term. Most COMMODITY stocks held support on the recent pullback and are now reasserting themselves.
GOLD and GOLD stocks are extended here and need to pull in but SILVER and SILVER stocks are sitting right on the 50-day. GOLD is much stronger than Silver.
BIG CAP GROWTH TECH looks poised higher here as the market gets narrower. Looks like they will attempt to move out of small ranges here.
There remains a lot of talk how the economy cannot support this move up. These people may or not be right. Remember, in the short run, markets are about supply and demand. Ultimately, markets will be about the fundamentals. The greatest lesson one must learn comes from the psychotic year 1999. I still recall companies with zero sales with a $1 billion market cap…and regardless, the stocks would double and triple. Ultimately, these stocks would go to zero. So…watch the market. If the economy will not support this move, eventually, the market will come in…but let’s let the market decide if and when that will be.
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