Keeping Ahead Of The Game

January 23, 2002
Gary Kaltbaum

Every time I
see something that stands out … something that tells me there is a
major change in direction … something that makes me want to act upon …
something
that makes me want to write … I get this sinking feeling in my stomach. Is my
interpretation going to be right — or am I going to be woefully wrong?
Fortunately, all the studying, all the time, all the sweat, all the questioning
and all the doubt, continue to be what — I believe — keeps me ahead of the game.

I had no clue that two Wednesdays ago
the market was going to have a high-volume reversal day to the downside. I did
not know the lack of bearishness would go to an almost 10 year low at the same
time. The only thing I did know is that I had seen this combination before and I
recognized it. That is the lesson of this writing. Pattern recognition — the
tendency for things to repeat themselves. Times change…prices change…names
change, but the laws of supply and demand and the laws of fear and greed never
change. That’s what continues to embolden me. I have studied these patterns for
too long during all kinds of market conditions. You must study them too.
Confidence only builds through time and through trial and error … and man …
I
have spent the time and made my share of errors.

But not this time. Jan. 9’s
reversal day … to me … was a standout day that could not be ignored. I hope you
followed my lead. Now what? No clue. Just as I said throughout the rally that I
had no idea how far it would go or how long it would last … the same now goes
for the downside. I just urge you to take a step back with the longs while the
markets go through this distribution phase. Yes, the markets could go back to
the September lows and yes, this downward move can stop on a dime. Today is all
I care about and the tale of the tape is becoming more unpleasant by the day.

I would say that the one thing the
market has going for it this second is that it has become somewhat
oversold…but that doesn’t mean it can’t go lower. Since my short-term support
levels have now been breached, it’s time to go to longer-term levels. Simply
put, if they are broken, things can only get worse. The levels are a definable
9700 for the Dow … 1115 on the S&P
500 … and a 1900-1918 Nasdaq.

There are other things that do not
excite me. The fact that the Dow and S&P 500 are back below their respective
200-day MAs is worrisome, as well as my sentiment numbers which are still too
bullish. SO … this remains go-slow time. You may also want to review some of the
leading names of the past 90 days.Â