Let The Market Decide

  • October 14, 2002
  • Gary Kaltbaum

“BOTTOM.” Do
you know how many times I heard or read that word this weekend? Even in the
Bahamas, I could not get away from everyone asking whether the market
bottomed on Thursday. Yes, I kept a scorecard. During my baccarat game,
I was asked 21 times by different people. In the newspapers, about
54 times. On television, a few hundred.

Amazingly — and I mean amazingly — the same people that
have been calling for the bottom
in the market for more than two years are at it again. After being
wrong about 25 times, they are all back. I
call this amazing because these same
pundits refuse to call it quits. When I was a kid, I was taught that
when you are wrong once, figure out what you
did wrong and fix it. I guess that
doesn’t work for Wall Street. So…just two days after a six-year low…with
many people calling it a bottom…do we have a bottom?

I have one answer. I DON’T CARE. Here are some random
thoughts.

  • As I told you in my last report, the markets were very
    oversold…just on     price
    alone. That leads to rallies. The Dow had
    dropped 1700 points since     8/22…by
    any measure, a huge move down in price, as well as in time. So far,
    every other rally in this bear market
    occurred to do one thing: work off the     oversold
    condition until the market was ready to dump to a new low.

  • As of this second, the market’s retest of the lows has
    been successful. This     could
    become a “double bottom.” Notice the word “could.”

  • The “double bottom” that I proposed could
    happen in October would have     had
    more panic at the lows. While fear did pick up, it did not “feel”
    like or     look like what
    happened in July.

  • The longer-term condition of the market has not changed
    one bit. All of the     problems
    I have outlined for you in past reports remain. If this rally has
    legs, it would only be of short- to
    intermediate-term consequence.

  • The move in the Nasdaq
    does not impress me at all. You must remember that the average stock is down
    75%-80% off its highs. I do not get excited when a $9     stock
    bounces up to $10 after dropping from $80.

  • I still have less than 100 stocks in decent technical
    condition. The best moves so far have been reserved for the worst stocks in
    the market. There     still
    remains a complete lack of leadership.

  • Lastly, and at the risk of making you hurl your
    lunch…for the millionth time…repeat after me: BEAR
    MARKET RALLIES ARE SHARP, QUICK, GET PEOPLE
    TALKING ABOUT THE BOTTOM, START TO MAKE YOU FEEL
    GOOD, MAKE YOU WANT TO BUY,         SUCK
    YOU IN…AND BURY YOU SEVERAL WEEKS LATER.

Learn a lesson from past bear market rallies. Doesn’t this
700 point rally off the intraday lows smack of every other rally? I will just
let the market decide. If this
is for real, I need to see a follow-through day this week. I need
to see some successful breakouts. I need to see doubt pervading the rally. I
need to see heavy volume on the up days, light volume on the pullbacks.
I need to see the market absorb bad news. Let’s just say I need to
see a lot.