Stock Market Distribution
Gary Kaltbaum is an investment adviser with over 25 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.
Over the past week, the market has come under some serious distribution. That is the big money crowd is now selling. It is now time to closely watch a very important area of support and that is the 50 day moving average for the major indices. The 50 day has been defended all the way up. Every time major indices have pulled back, the big money crowd has come to the rescue at that level. This is the norm for every bull phase.
For starters, the TRANSPORTS broke that all-important level last week…and in the subsequent bounce up, failed at the underside. This is quite negative for the TRANSPORTS. Of course, there is cause and effect here as oil prices continue to skyrocket…but don’t worry, “wrong way Bernanke” says there is no inflation.
The NASDAQ is currently sitting on the 50 day…but tracing out an ominous pattern…a drop on heavy volume…a bounce on lighter volume and a drop on heavier volume. This is normally not a good sign as it specifically indicates sellers may be getting the upper hand. Other major averages are very close and also tracing out these ominous patterns.
Digging a little deeper, on top of all the TRANSPORTS, I am seeing breakdowns in some FINANCIALS, CRUISE LINES, HOTELS, a decent amount of RETAIL, a good amount of the METALS/MINING names…and to be clear the list is getting larger for the negative side of the ledger.
Can the market stave off a correction? Of course, but corrections are a normal course of market business. Let’s just say it will need a goal line stand…and soon. Corrections are not a bad thing. They serve to work off froth, wipe the smiles off the bull’s faces, embolden the bears and more importantly, set the leaders up for another move higher when the correction ends. So watch these levels…DOW 11,900…S&P 1296…NASDAQ 2730 and then 2676…NDX 2300 and then 2258…RUSSELL 2000 800 and then 771. A break of these support areas will lead to more technical selling. Watching closely.
If the market does move into a correction, at that point, we sit and wait for the market to show the characteristics that the selling is over. The last correction was about 15-20% depending on what index you look at. That ended on September 1 with a strong follow through day that stopped the correction and put the market back into an uptrend.
Lastly, I watched with mouth agape as Bernanke, in testimony yesterday, continued to claim inflation is not a problem. I remind you that during the 07-08 period, I was constantly writing about a man who kept saying subprime lending was not an issue, the economy was fine and housing was bottoming. All the while, he was shirking his responsibility to oversee the lenders. In other words, woefully wrong. In the infinite wisdom of the choosers, he was rewarded with another term as the head of the Fed when frankly, I would not let him run my kid’s lemonade stand. Imagine, cotton has tripled, sugar has doubled, wheat has doubled, oil is skyrocketing, gold is soaring, silver is soaring…and just about every other commodity is in flight…a lot of it caused by this man’s maniacal policy of castrating our currency and creating money out of thin air…but there isn’t any inflation. Again, he is sowing the seeds of potentially out of control inflation…just like we saw in the late 70s. Every policy out of this man is to expand debt in leverage to cure problems that were caused by debt and leverage that this man created in the first place. Quite amazing…isn’t it? Inflation is now in plain sight and he still says everything is fine. To add one more thought…where is the outrage by the savers of this country? Money market rates remain at zero…when frankly, they should be in the 2% range. One man is keeping rates down. The outcome? Instead of savers getting a couple percent on their funds, that money is being kept by the financial companies. Are you kidding me? The same companies that almost caused the house to come down are now being rewarded at the expense of savers…all because of one man’s decisions. I have no clue how one man who has never run a business…has so much power. I am long-term scared.
Gary Kaltbaum owns Kaltbaum Capital Management, LLC (“KCM”), an investment adviser registered with the U.S. Securities and Exchange Commission. The opinions expressed herein are those of Mr. Kaltbaum and may not reflect those of KCM. The information offered in this publication is general information that does not take into account the individual circumstances, financial situation or individual needs of an investor. The information herein has been obtained from sources believed to be reliable, but we cannot 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.