Nothing Wrong With This Market, Except…

  • May 18, 2005
  • Gary Kaltbaum

Several times in the past few weeks, the market
has teased a break of new lows. Several times in the past few weeks, the
market has teased to the upside. Just this past Friday, the market teased the
downside. Today, they are teasing the upside again. Here is the good news.

The longer the market successfully retests lows,
the better chance it has to go higher. Why? It gives stocks the chance to
build longer bases and that’s exactly what we are seeing now.

Of note:

On top of the TECH space showing outperformance, we
are now starting to see RETAILERS turning up.  In fact, a few names have
broken out of short bases. Nothing wrong with that.

The BOND MARKET has cooperated about as good as it
can. The 10 year yield is now sitting below 4.1%. This has most definitely put
in a bid into the FINANCIALS and other INTEREST-RATE SENSITIVE areas.. Nothing
wrong with that.

We are seeing strong closes again. We have taught
you throughout the years that the way the market closes is a very important
technical tool. We would love to see this continue. Nothing wrong with that.

There is nothing wrong with what we are seeing in
the past couple of days as the market is putting up a good fight. We think
that the most important occurrence is that many stocks have turned a corner
and are now coming up the right side of their bases. This is a good start.
Nothing wrong with that.

The one broad area we would be suspect of remains
the COMMODITY/INDUSTRIAL area as well as the CYCLICALS as it feels like any
bounce into resistance is sellable.

If we were to throw one fly in the ointment over
the past couple of days…it is the continued lack of powerful volume. Volume
is the driving force behind a CONTINUED move. We gather that will have to
improve or the market will peter out as most major indices are heading into
the meat of resistance. We just have to be happy that individual charts are
now starting to turn up. We are now back RIGHT IN THE MIDDLE of the nauseating
trading range.  Can’t wait for tomorrow.

Gary Kaltbaum