Short-Term, Bounce. But Here’s The Rest Of The Story

  • May 24, 2004
  • Gary Kaltbaum

After scanning the market over the weekend, I have
come to the same conclusion. The market is going to remain, at best, a very
challenging affair. One only needs to look at the ridiculous action of the
past couple of weeks to see why I say that…nothing but a bunch of gaps to
the upside and gaps to the downside with vicious reversals. Amazingly, during
that time, the market has not moved. But that’s being nice as the market
running in place is an improvement  from the past few months. 

Shorter-term, I think we can bounce more…but I
must tell you that the bounce the market is attempting is about as anemic as
they come. All our indicators are deeply oversold, which normally leads to
 decent bounces. So far, any move up on just an intraday basis…is getting
slapped down by the close. In fact, if not for a last second flurry to the
upside, Friday’s market was working on another negative reversal akin to
Wednesday’s.

For the hundredth time…go slow. If the market
wants to break to the upside, it will let us know. So far, ain’t happening. In
order for this market to make this bounce get at least a decent leg, keep a
watch on these numbers…DOW 10094, S&P 500 1106 and the NASDAQ 1937…all
numbers that break above last Wednesday’s highs. Keep in mind, even if these
levels are breached, I am not sure sure you should get too excited…but it
will be a start.

Now to the yucky stuff.

There are many more groups in poor technical shape
than good ones. This is in stark contrast to last year. The numbers have been
getting worse on a weekly basis.

Ditto for individual stocks.

World markets are going for the ride.

Mutual fund cash is down to 4.4%…the same
number it was down to in early 2000.

IPOs and secondaries are now coming to the market
in droves. This sucks up liquidity. It is also not exciting that many
unprofitable companies are now going public. Remember BUY.COM!

Now onto something important…support levels.
Oversold conditions or not, on the unlikely occurrence (at least for right
now) that the following support levels are breached on a closing basis, what
has been an ugly tape…will get much worse. With the fact that the market
still can’t bounce, they may come into play…but will only deal with it if it
happens…DOW  9852…S&P 500 1076…and NASDAQ 1865…all lows of last 2
weeks. 

Gary Kaltbaum