Stretched and extended…
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. If you
would like a free trial to Gary’s Daily Market Alerts
Before I get started, I just wanted
to say that it was my 20th anniversary this weekend. I am not ashamed
to say that I am the luckiest dude in town….but how anyone spent 20 years with
me is a modern miracle.
I wish I had something new and original to write today…but I
don’t. Not much has changed. The only thing that has changed is that the market,
despite being extended and overbought at the beginning of the week, has become
more extended and overbought. So at the risk of being unoriginal, I will repeat
what I said on last Monday:
“As far as the major indices go, as long as we continue to see
a lack of distribution days, I am good…but…
Shorter-term, things are extended. Stocks that have been
leading this move like the TRANSPORTS and miscellaneous FINANCIALS, have gone a
wee bit parabolic. I will not be a doofus and call for a pullback again…but I
will say I would not be surprised if we get one.
I have not been thrilled with the Advance/Decline figures or
the up/down volume on a daily basis. In fact, they have not been even close to
keeping up with the market. Simply put, the market has gone big-cap. Big-caps
have much more influence on the major indices…thus the recent move.
I have not been thrilled that NEW HIGHS are much much lower
today than the last time we hit these levels. This simply indicates that fewer
and fewer stocks continue to participate. All of this could eventually come back
to haunt the market but until the major indices give way or distribution show
up, continue to concentrate on the sectors that have been leading.”
Before I get into the previous paragraphs, here are the
positives. It is a positive that:
The NASDAQ
(
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PowerRating) broke above the 2200 level and is now
actually at yearly highs.
The NDX
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NDX |
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PowerRating) remains above its recent breakout.
The TRANSPORTS continue to roll.
The DOW
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DJX |
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PowerRating) finally broke above resistance…but is
still shy of the yearly highs.
MID-CAPS broke to new highs.
WORLD MARKETS are rolling…with Japan sizzling.
No complaints about the major indices…none at all.
I just would like you to keep referring to the first few
paragraphs from this report. If nothing changes, it will set up a huge
divergence…probably in the early part of next year. This is the same type of
divergence that stopped last year’s year-end rally. Basically, what is occurring
is the mega-caps are finally getting a life. These stocks have a major influence
on the major indices. The GEs of the world are finally catching a bid. Names
like MSFT
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MSFT |
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PowerRating) (which is 14% of the NDX) are also helping. Underneath the
surface of this big-cap move, fewer and fewer names are participating. We will
see soon enough how this will play out.
This does not take away all the powerful action we are seeing
in the stocks that are working. In this environment, I would continue to play
the high volume breakouts and the low volume pullbacks as they occur.
Gary Kaltbaum