Nice Bounce, but There’s Still Problems in the Markets
Gary Kaltbaum is an investment
advisor 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
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After reading massive 5-10 page reports by the mainstream media about Abu
Ghraib,about poor results in Iraq,about everything negative and about all the
supposed bad things about America, our military and the like, why am I not
reading massive reports on the fact that things are now better in Iraq? Why is
the media all but silent? And before the hate mail comes in, I am one that wants
out of Iraq. My point is that the mainstream media doesn’t even pretend to hide
their bias any more. Speaking of not even pretending to hide their bias, that
was a nice job CNN did vetting the questioners during the recent debate. Funny,
they had none of these problems during the DEMS debate. What a laugher!
Hank Paulson, the man who has been calling a bottom in housing since he took
his job…the man who said everything was contained…now front and center with
a government-led plan to freeze interest rates on subprime home loans. Let me
get this straight. An administration that is supposedly free-market
oriented…and a believer in a non-interventionist government…wants price
controls? Yup…price controls. The hypocrisy is laughable…but more
importantly, this idea is insane. Why? This plan will only prolong the real
problem…and that is all these homeowners are upside down and under water.
Dropping prices is the real problem…not the interest rate or the payment made.
This idiotic plan also allows the holders of the mortgage-backed securities to
put off the inevitable…which is to mark down the assets to their real
value…which is much lower. I believe in free markets…not what these
imbeciles are looking for. They should allow the markets to work. This will only
stall the inevitable bout of more foreclosures coming our way.
Let me get this straight. GDP just came out at 4.9%…unemployment is at
4.7%…yet Bernanke all but said another half point cut is coming? That’s
right… just go ahead and fix the problems we are having because of excess
liquidity… by adding more excess liquidity. Remember what I told you after the
first rate cut…and that is he would cut…cut and continue to cut. Here comes
a half point!
The dollar has bottomed…at least for the near-term. I swear! As I said on
TV last week, over 90% of traders are bearish on the dollar and seeing front
cover headlines of the declining dollar. I also make note that while I want a
stronger dollar, I believe it is been used too often to describe “the end of
America as a power” much too often lately. Get a chart of the dollar going back
many years. It is fine! On another note…I now love my call of lower oil when
it was at $99. I am surprised it is back to $89. Nothing bad happens if oil
prices come down.
Is Isaiah still coaching the Knicks?
The market is back to a confirmed rally…albeit with lots of warts. Let me
pick it apart. Why? Because it has been much more important to talk about what’s
underneath the hood than what is going on with the DOW. If you owned financials
or retail or semis all year long, you have been crushed.
As I told you, I expected a bounce into resistance…which we got on cue. The
worst areas bounced the best because of how deeply oversold they were. In fact,
many financials had crashed. The fedspeak as well as the almighty Paulson saved
the day with their intervention. But it counts. Financials popped strong…but
keep in mind, these are bear market bounces. Yes…they can bounce more…but
yes, they can also hit a wall immediately. They are in no man’s land right now.
My guess is that there is more upside testing…but frankly, I am not betting on
it. Make note of the few strong names…STT, NTRS come to mind. Semiconductors
remain on the morphine drip. I actually believe housing just started another one
of their bounces…that will fail. Retail also popped up with the market…but
not seeing too much there. I like a DECK and NKE though. I love the fact that
Sears finally was klonked. I could never understand how a crummy company’s stock
kept going up.
Leading stocks held their important supports/moving averages in the past
week…giving the impetus for the rally. When you have a chance, take a look at
the charts of: GOOG, CME, EDU, BIDU, MTL, MICC, SOHU, SPWR, RIMM, AAPL, MA, MON,
ISRG, and CRS. These are the strongest of the strong…which only pulled in. If
they continue to hold and act well, it will be meaningful for the market. If
they come down and break recent support…good night. I will be looking at these
names and the rest on my narrow list for good entry points. When the market is
in a confirmed rally, it is time to make hay. The problem is that many of the
leader’s charts are quite wide and loose here. I believe they need time to
tighten up. I will not be happy if they go straight up from here without
building new bases…as they will then be prone for trouble.
As you know, I do not try to predict too far out because no one can. I just
try to interpret the evidence at hand…which is all I have needed. Now that we
received the expected bounce, it will be more important for me to see the
underlying internals improve. As I told you, I was not so worried about the
near-term because we were getting into end-of-year action and that was combined
with a huge oversold and extended condition in the market….and now, December
is at hand. December is usually a good month because THE BOYS try to make their
year. I am just letting you know again…that if the internals do not improve
markedly, January could provide serious problems again as markets have topped
many times in January.
Gary Kaltbaum