Still Just a Bear Market Rally

August 18, 2008
Gary Kaltbaum

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 Market Alerts click here or call 888.484.8220 ext. 1.

I hereby quit everything I do to become Michael Phelps’ agent.

Quotes-

Lehman: “Oil prices to fall in Q4 and Q1 next year; oil has peaked for next few years.” Yes…Lehman knows where oil prices will be for the next few years.

Greenspan on July 31: “The U.S. is ‘nowhere near the bottom’ of the housing slump.”

Greenspan on August 14: “Home prices in the U.S. are likely to start to stabilize or touch bottom sometime in the first half of 2009.”

Do you think this man even remembers what he said 2 weeks before? And why is Greenspan, who has been calling the bottom in housing since 06… still being interviewed? Why is the man who was the root cause of everything we have been seeing… still being interviewed?

The “market” continues to trend higher as the follow through day that occurred on 7/29 continues to hold sway. The market has experienced some distribution but not enough to kill this nascent rally. But… most talk of the market. My job is to talk about what is working inside the market. I disagree with everyone who just says they are either bullish or bearish because side by side, we continue to have bull and bear markets. When the market was going up in April and May, the bulls said to buy buy buy, but the only things going up were COMMODITIES. Markets are now bouncing up again and of course, the bulls say buy buy buy… but this time the commodities are being smoked while all the previous bear market areas are now leading. So… let’s pick it apart.

On July 2, I called a major top for you in the COMMODITY areas. At the time, it was the only game in town as COAL, STEEL, OIL, FERTILIZERS, AGRICULTURE and the like continued to romp while everything CONSUMER continued to be crushed. July 2 topped most COMMODITY areas. July 15th topped the OILS and the GOLD… and I hoped you listened. Before those tops, I was nothing but bullish on these areas. I have been asked how and why these areas have been bludgeoned so badly. The answer is simple: money is much hotter and faster moving than it used to be. It used to be that stocks were sold off quietly and more slowly. Now… it is “get me the heck out!” Expect this to continue as hedge funds and others have quick trigger fingers especially when it comes to what I call “crowded trades.” I would absolutely continue to stay away from everything COMMODITY except for short term trades. The major trend remains down… albeit very stretched and oversold to the downside… which could lend itself to vicious snapback rallies. The outcome of this has been money flows coming out of COMMODITIES have found their way into everything CONSUMER.

On July 15th, OIL and GOLD topped… on July 16th, everything else bottomed. And you need to know that “everything else” has much more sway over the major indices than the COMMODITY areas. Well not all the major indices… as the not often mentioned AMEX is at new yearly lows because of how much ENERGY is in that index.

As far as the CONSUMER areas, they continue to get a bid. These areas were the worst of until July 16th including RETAIL, AIRLINES, HOUSING and the like. This is not great leadership… just mostly a ton of stuff coming off bear market lows. Let me be clear. They had better continue up.

It does not even pay to talk support and resistance right now as it is all short term talk. Shorter term, it does feel like markets are churning a bit here and would not be surprised to get some pullbacks… but that is just the short term. For me, the bottom line is that the market has bounced for 4 weeks… which is quite normal in bear markets. The last rally lasted 8 weeks… only the players have changed. For me, so far, this rally has been anemic but I will give it every chance to get going. My other major problem is that many leading breakouts have failed miserably and I am certainly not finding anything resembling powerful action in leading growth names.

Lastly, it is important to note that world markets are now lagging our market badly. Remember, everyone has told you to stay invested internationally. Well, China is down 53%. You remember China and their fabulous growth. Also, many world markets are laden with commodities, thus the recent poor action in places like Russia, Brazil and other submerging markets… I mean other emerging markets. If you have to be invested, there is no place like home.

Disclaimer: The opinions expressed herein are those of the writer and may not reflect those of Wunderlich Securities, Inc. or any of its affiliates. The information herein has been obtained from sources believed to be reliable, but we can not 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.

Still Just a Bear Market Rally

BUY THE FEAR, SELL THE GREED

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