Gary Kaltbaum is an investment adviser with over 25 years experience, and is 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.
In my last report, I stated that the economy had topped based on the action I was seeing in the commodities. Because of that report, I received many responses that I was nuts. Those responses magnified when the “supposed” good job’s report came out while I was out of the country. I have news for everyone who believe in those reports. I WOULD RATHER BELIEVE THE MARKET THAN A GOVERNMENT REPORT! Government reports are flawed and in this man’s opinion…are a joke. Inflation reports no longer include food and energy…huh! Ladies and gents, many important areas of the market are starting to speak loudly and clearly. Again, those that kept saying commodities were soaring because of strong demand will have to come up with some other excuse on why they are getting smacked. And to make matters worse, I now believe that not only have the commodities embarked on a bear phase but I suspect you will see the rest of the market do the same…as the major indices are sitting on the ledge and are in dire need of a goal-line stand.
It is normal for major indices to hold up as the market goes through a topping out process. Money flows out of risk and into the lowest beta, the most defensive and the biggest cap stocks in the market. Recent leadership can be seen in the foods,drugs,beverages and several megacap dow stocks. While these areas have received the money flows, many areas of the market have already broken down. All we need to see now is for major averages to break the all-important 50 day/10 week moving averages and you can get out the big fork. I suspect the market is close.
Topping processes usually occur over time and in the same way. For instance, in the past few months, we have seen:
The FINANCIALS are acting like they did in 07. I am not saying there is going to be a repeat. I am saying they are acting like they will repeat.
The COMMODITIES top out with some almost crashing.
The NEW HIGH divergence continues as there are about 50-75% less new highs than the last time market was at the highs.
We are now seeing leading growth names break down. APPLE,BIDU,PRICELINE come to mind. Many more have broken down.
Important ETFs like BRAZIL(EWZ),CHINA(FXI),EMERGING MARKETS(EEM) alll look to be putting in broadening tops.
Sentiment became extremely bullish…with no bears to be found. Other sentiment indicators:
A ton of IPOs have been coming out. In the recent past, many of these IPOs have been of lower quality.
We are now seeing ridiculous valuations for future IPOs, especially the social netowrking area.
We are seeing a decent amount of secondaries.
We are seeing a ton of buyouts. IPOS AND BUYOUTS DO NOT OCCUR AT BOTTOMS!
So…here are the vital support levels that must be watched. Up until now, these levels have held. But under the weight of more and more negatives, these levels eventually break. Markets could be close. The RUSSELL 2000 has already broke below the 50 day/10 week moving average. The NYSE is now a smidge below. The NASDAQ is just below at about 2775. The NDX is just below at 2332. The S&P 500 sits just below at 1322 and finally, the DOW, which is holding up best , has some room to 12,380. In bear phases, the DOW always holds up best as again, money flows into the most liquid names. WATCH THESE LEVELS. A clean break below will put a deteriorating tape into even more trouble.
Gary Kaltbaum owns Kaltbaum Capital Management, LLC (“KCM”), an investment adviser registered with the U.S. Securities and Exchange Commission. The opinions expressed herein are those of Mr. Kaltbaum and may not reflect those of KCM. The information offered in this publication is general information that does not take into account the individual circumstances, financial situation or individual needs of an investor. The information herein has been obtained from sources believed to be reliable, but we cannot assure its accuracy or completeness. Neither the information nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Any reference to past performance is not to be implied or construed as a guarantee of future results.