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.
My thoughts and prayers go out to all the victims of the senseless attack in Tucson.
Nothing bad happens in the market if things continue to trade above the rising 50 day moving average. So far, all major averages continue to trade above…and until that dynamic changes, it is silly to become too bearish. For sure, there are now areas in trouble and bullishness has now gotten out of hand, but until distribution shows up in a meaningful fashion, again, it is folly to become too bearish. That’s the overall good news. Time to pick things apart.
As I have told you for years, sentiment is a secondary indicator. Primary indicators are price and volume. But secondary indicators have to be watched, especially when they go to extremes. Extreme bearishness gets you closer to bottoms as everyone who wants to sell, has already done so. Extreme bullishness gets you closer to tops as everyone who wants to buy, has already bought. In past weeks, bullishness has become extreme. For instance, strategists have been falling over each other with their bullish 2011 targets. For instance, low priced stocks have surged. For instance, insiders have been selling the most they have sold in years. For instance, we are now seeing a good amount of IPOs and secondaries adding supply to the market. Lastly, all the surveys of investors and newsletter writers have lost most of the bears while bulls have picked up markedly. The good news is that sentiment is not a pinpoint indicator…so extremes can go on for a while, thus we watch price and volume.
To get the not so good out of the way:
RETAIL stocks are being smoked. Many names have been breaking down for the past couple of weeks. The RETAIL group is one of those important groups to follow.
We are seeing serious underperformance in countries like INDIA,CHINA and emerging markets over the past few weeks. Typically, these areas have led…so something to watch.
GOLD and SILVER are finally losing some relative strength but not so sure that is a bad thing.
Yes, there are a few other areas in trouble…and a decent amount of names…but after that, everything else remains above moving averages and in uptrends…where pullbacks are buyable until those moving averages are taken out. Just keep in mind, the pullback in November pulled the market right back into the 50 day average.
The all-important SEMICONDUCTOR area continues to romp as the SOX can’t even go below the stronger 21 day average. Those that have followed my reports know how much weight I put on this area.
FINANCIALS have led in past weeks. Notwithstanding Friday’s scare, they remain in uptrends. Even HOUSING stocks are catching a definitive bid here.
Just keep in mind, the rally from the March 09 lows is now 22 months old…which makes it long in the tooth. Add in the bullishness, and we must recognize there is now much higher risk in here of a correction, at least back to the 50 day average which is a few percent below. But as long as the selling doesn’t rear its ugly head…
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.