The Cuckoo’s Nest
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.
Before I get going with the market, please please please do not watch or listen to anyone who’s own account is down almost 40% this year… who called bottoms in the bear market on numerous occasions, the last one being right at the last highs… who turned bearish at numerous bottoms like the March low only to turn bullish at the July top… who told you to buy Lehman and Wachovia just before they went out… who told you not to worry about Bear Stearns a week before they went out…or they would be bought at very high prices… who gets called on the carpet by other on-air personalities and lies about his record…who told you to buy a house and homebuilders… who told you to buy the banks, brokers and the market on June 13th and then when the market tanks 500 points the next week, on June 20th said that he hated the banks and called those same banks TOXIC RIVERS, gave out BKHM at $8 on his first college show only to watch it go to under $1… who said to buy the SIRI/XMSR… who on Feb 1 told everyone he loved Citi, Wamu, Merrill, Capital One… who’s stock of the year for 07 was NYX… not to mention Apple, Google, Sears and the other thousand missed calls or his stock for August being RIMM that dropped by 60%… who kept telling you to buy commodities as they crashed… who called another big bottom in the the summer, the one that would not be filled… who then watched the market crater thousands of points and then after being horribly, horrendously wrong and destroying wealth for anyone who listened… who literally missed this whole bear market… goes on tv to tell you no stocks for 5 years… who then claims how good he is… and now calls for 4700 dow by THIS Tuesday in his weekend missive if the right decisions are not made.
Let me be clear… this is not predicting the market, this is a clown trying to be the story even though he couldn’t hit the side of a mountain with a bazooka. These calls are just to attract attention to his massive ego by trying to force down the market for his own gratification and headlines. This is just more of the inmates running the asylum. It is these types of people who make my job that much tougher… who try to make everyone who called this market correctly smaller. The losses people have seen in the markets by paying attention to people like this are not funny. Bear markets are not funny. Drops of 45 percent in the market are not funny. Crashes are not funny. Having your life savings wiped out by listening to these people is not funny. Watching someone on tv eat a plastic bear and tell you you must buy with abandon because the market is cheap is not funny… and now trying to crash the market more than it has is not funny! I absolutely cringe to see such assinine predictions about the market when so many people are pulling money out of the banks as well as pulling their hair out. Things are fragile enough without a blowhard throwing kerosene on the already blazing fire. The time for real caution was weeks ago when said imbecile was calling the bottom. If you know anyone like this, please please please think clearly before watching or listening. There could not be anyone out there like this. Could there?
Please George Bush… do not shut the market down… under no circumstance do you shut the market down. If other countries want to… fine. Do not shut the U.S. market down, even for a day!
GM merging with Chrysler? Isn’t that like merging the flu with pneumonia?
First off and most importantly, I remain in 100% cash and am easily one of the only money managers that are not down this year. I have been itchy to buy because of how bearish sentiment is but have still not seen the characteristic that would get me probing yet. There will eventually be bounces… maybe big bounces… but I have to make sure I do not have to look over my shoulder.
In the past, I have studied the 87 crash and always asked myself whether I could stay out of the next crash. I always thought I would… but now it has been done. The crash in 87 did not come out of nowhere…just like this one. The market had previously topped taking most things into a bear market. This time, the same happened… only much, much more in advance. I had been telling you that one of the characteristics of bear markets is panicky action… but this one is for the books… and in every way. Here are some stats, and then my thoughts of future possibilities.
Only 1% of stocks are in good technical shape. That is the lowest in history. Even in past bad bear markets, there were areas that held. In the past week, they creamed anything left standing like all the DEFENSIVE issues that should be doing better as the economy craps out.
I have exactly 0.0 sectors in bullish shape. You remember Dean Vernon Wormer…”0.0!”
No new highs and new lows in the range of 4000.
Major averages as stretched to the downside as they come… I think.
Very simply, you only get this type of action when you have forced selling… yes, one of the greatest if not the greatest margin call in history where all fundamentals get thrown out because there is not a need to sell but leveraged idiots HAVE TO SELL!
I do not need to tell you what is going on any more… even though in coming reports, I will continue to outline how stupid the “problem solvers" are. Hey… how’d that government bill go for the market? I just needed to point out that this is still a bear market… a bear market with teeth which you should continue to avoid at all costs.
When I went back to the 87 charts… after the 87 break… I found that markets stopped going down… but sat around for a good year building bases and repairing the damage… just something to think about once this wild action calms down. Remember, I look at bearish markets and bearish stocks as injured markets and injured stocks. The worse the injury, the longer it takes to repair. How do stocks repair themselves? They stop going down and rebuild bases – that takes time, sometimes a long time. I would be thrilled if the market just stopped going down.
That leads to the short-term… which is impossible to call because of all the news events. So I will just tell you what normally should occur. NORMALLY, after a big whipsaw like Friday and where the market rifled back up into the close (though they kicked it in the teeth in the last 10 minutes), I would expect to get some backing and filling but also a bounce… even a decent bounce to work off the ridiculously oversold and stretched condition to the downside. Since this market is so stretched, maybe even a big bounce. Friday was the first time in days I “felt” the market being defended a bit. NORMALLY, we would be hearing about massive buybacks by corporate America but right now, I am not so sure corporate America wants to spend cash. I could give you all the NORMALLY action, but it is pointless in that we are dealing with G-7 meetings, potentially more bailouts, governments buying into banks and so much else.
I would just tell you to take your time, relax and hopefully things start to calm down. I am just sitting here in awe with my feet firmly planted hoping for the market to show the characteristics of a turn. Sentiment-wise, it is all there. Technically, not even close… but I do recognize bear market rallies from extended conditions can be powerful. If I was to micromanage I would say  I am seeing a few COMMODITY areas being defended here… and if I wanted to be very particular, I would say the NASDAQ was down huge last week but Apple was flat. It is this type of relative strength I will be looking for as on any respite in this downtrend, strength usually tries to show itself. That does not mean you go out and buy because things will remain random.  It means you take your time. I have no idea how anyone can go home being short or long not knowing what the next day will bring.
Ladies and gentlemen, this is one of the big ones. It is worse than 87 and in my opinion, worse than 00-03 and 73-74… only the names have changed. The markets suffered their worst week ever, and I now worry not just about what the market is doing… but what the market is telling us. I am keeping my fingers crossed. There is no place to hide as even GOLD is not acting well and GOLD STOCKS are crashing. One would think GOLD would be $1500 by now. I suspect we may see some more days like Friday where we see amazingly… 1000 point moves. On Friday, amazingly, the DOW was down 700 and within 30 minutes, rallied into the green. It drops back to down 600 by 3 pm and within 40 minutes, rallies over 900 points. Then, and again amazingly, it drops over 400 points into the close. This is what happens when markets are so extended, stretched and fragile.
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 or 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 result.