Overbought conditions remain
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
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Not much has changed for the DOW and
S&P since we wrote last. The DOW and S&P continue to get the strong
bid…and that’s in spite of extended and overbought conditions.I thought there
would be some corrective work by now but nothing doing. Sometimes, overbought
and extended just gets more overbought and extended. Eventually, these areas
will revert back to the mean…which is a pullback into moving averages or
support. So far, pullbacks have been short-lived and nominal. A scan of the DOW
shows many names either breaking out or setting up to break out. Until this
changes, it gets the benefit. Recently, we have seen
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AXP |
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GE |
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PG |
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MSFT |
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even
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C |
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DIS |
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UTX |
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GM |
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JPM |
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PowerRating). Notice I did not mention anything about the all-time
highs in the DOW. Please keep things in perspective. It is clearly a positive
that it broke the highs but not thrilled with all the noise. I like markets to
move quietly. Whenever we have all seen and heard too much noise, it has marked
the end of a move in the past. Many are complaining about the DOW being weighted
in a way that accentuates just a few names. They are correct. Many DOW stocks
are WAAAAAY down from the all-time highs. The DOW has been riding the wave of a
few names…but everything counts. I can throw cold water on everything also.
I have been telling you about all the negative divergences we
have been seeing while the DOW and S&P lifted. I have talked about the weakness
in small-caps, mid-caps, transports as well as other areas. These areas are
still lagging but I must tell you, yesterday’s action was the FIRST TIME since
the lows that I felt some OOMPH in those areas. Don’t ask me to explain OOMPH.
If those areas can continue to join in the upside, the upside will be more
longlasting. I liked that growth names like
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RIMM |
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PowerRating) and
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AKAM |
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recent breakouts. I have not “felt” the power in growth areas until yesterday.
Let’s hope it continues.
The bulls are now pounding their chests…and rightfully so.
The bears are scratching their heads and pulling their hair out. The bulls say
the drop in OIL as well as the drop in INTEREST RATES are causing the rally. The
bears say the drop in those areas are forecasting a recession. Listen to all but
pay attention to none. The market has been the great forecaster of the economy.
Does anyone in their right mind believe a recession is around the corner with
RETAIL stocks showing strength? Does anyone in their right mind believe a
recession is around the corner when FINANCIALS have remained strong? In my
studies of past markets, no recession has ever occurred while these areas are
strong. If things change…then we can talk…but never fight what the market is
saying.
Sectors:
I am still quite negative on everything COMMODITY but
near-term, I am feeling like some areas are washed out…specifically OILS. I
suspect there may be a relief rally in store but until volume patterns change,
these areas are sells on the bounces into resistance. This includes GOLD/SILVER, COPPER, ALUMINUM, STEEL…
RETAIL continues to be monstrously strong but also
ridiculously extended. I have expected a pullback. It lasted two days.
TRANSPORTS are now playing catch-up but there is still plenty
of work to do as they work their way through resistance. It is a positive that
the TRANSPORTS moved through near-term resistance at 4521.
All in all…as a buyer of leadership and a buyer of growth
breakouts, it has not been the best market to be buying in. The IBD MUTUAL FUND
INDEX has lagged badly. This index is all about growth. I am hoping yesterday’s
action was something of a “joining of the party.” As always, I will be taking
it day by day and using the daily action as my guide. As long as I see no
distribution…as long as I see leadership breaking out…all is cool. Now we
get to deal with earning’s season…yummy! Just remember, NOTHING stays extended
forever. Be more and more careful as the bigger averages get more and more
extended…but don’t ignore the new breakouts if they occur…with stops of
course.
Gary Kaltbaum