The Low?
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.
Commentary for September 7, 2010
I titled my last report “A LOW?” (click here to read). In that report, I outlined a chance for the market to put in some sort of a low for a few reasons. First off, vital support continued to hold. Secondly, lots of bearishness pervaded the air and lastly, I thought there was a chance that the BOND MARKET was about to top…which meant stocks would rally as there had been a direct inverse relationship.
Well…a low has been put in as support stiffened and then on Wednesday, the market experienced a follow through day…and since, we have seen no selling and a strong ability to bid prices up. I know what you are thinking because I am getting a ton of emails. First, let me say that after I penned the “A LOW” report, I received a bunch of nasty emails with words I cannot describe here all claiming I was nuts to believe the market had not even the smallest chance of going higher…and in fact, would go much lower.
After all, didn’t you see analysts going on TV calling for depressions while the great charlatan finally turned bearish AFTER the drop? The market had to go lower. Not! The other part of the equation is the emails I have received this past weekend. Just about every one of those emails said last week didn’t count…that the market only moved up because of light volume, pre-holiday trading.
Well…why couldn’t the market go down during that light volume, pre-holiday trading? For me, I do not rationalize WHEN a market moves…just that it does. For me, the onus is back on the bears as the market is back into a confirmed rally. Leadership is showing up. In fact, as I told you last time, a decent amount of names just sat tight while the market was being hit. Also, the worst areas, RETAIL, FINANCIALS and SEMIS finally got a bid. When the worst lifts, the market lifts. At this point, until distribution rears its ugly head and yes, it can come out of nowhere, I am now actively playing the long side for the first time in a while. But I would still not get all wildly bullish.
The tape remains split as there is still a ton of stocks in poor shape…and now the market is into the meat of resistance after this three day romp. In fact, the market is already getting a little overbought here so I would not be surprised to see a pullback in the days ahead. But unless things change, I am looking at pullbacks to be buyable as the weekly charts now show decently strong bottoms in place. But again, if distribution shows up, we will take notice. I entitled today’s report “THE LOW?”…not “A LOW?” I think “A” low is in place for now. Let’s hope it ends up being “THE” low.
“THE GREAT CONTRARY FRONT COVER INDICATOR”
I needed to point something out that I noticed in the past week. Follow me.
TIME magazine just had a front cover entitled “RETHINKING HOMEOWNERSHIP!” It was a bearish cover with a bearish article about how maybe, just maybe, the great American dream of home ownership was over. Hey thanks! But …the title of their June 13TH, 2005 cover was entitled “HOME $WEET HOME”…notice the dollar sign. At that time, nothing but a bullish article.
Why do I bring this up? Because it is classic. These news magazines are notorious to report the news AFTER something has already happened and sometimes they report it at important turns in the market. It is not just TIME. It is all of them…because at that bullish time, FORTUNE had a front cover entitled “THE REAL ESTATE GOLD RUSH!”
As an example, I still remember Jeff Bezos being named Time Magazine’s MAN OF THE YEAR on December 27th, 1999 just as internet stocks were topping. I have nothing against Mr. Bezos as he has run a fine company but this is the kind of things that come out near trend changes. I have been one who has nailed the housing market (pat on the back) as I saw the housing and credit bubble before most and wrote and spoke about it. I am not saying housing is bottoming. In fact, I stated back in ’06-07 that this bear market in housing would last a decade…just like the one before.
What I am saying is now is not the time to put your head in the sand and now is not the time to rethink homeownership. That time was back in ’05 when TIME was running the “HOME $WEET HOME” cover and article. Prices are now way, way down and in many areas, you can steal houses at ridiculous prices in comparison to where they were just a few years ago. Just here in Orlando, I see houses going for $150,000 that were once $450,000. If anything, “RETHINKING HOMEOWNERSHIP” when prices are so far down should mean you are rethinking positively about buying a house, not the other way around…especially with interest rates so low because of Mr. Bubble Bernanke.
Back in ’05, it was buy-buy-buy no matter what the price was, no matter where the location was…and of course, no matter how much money you had in the bank. Thanks Angelo! I suggest now is the time to not think SELL-SELL-SELL but to look for those bargains as more and more inventory comes to the market because of desperation selling. Again, overall, I am not saying housing is bottoming. I am saying when things are so bad and at their worst and when everyone is bearish, it is time to think the opposite. Do the opposite of the front covers.
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 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. Securities offered through Wunderlich Securities Inc.
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