The Market’s Job Is To Fool The Masses — Does That Include You?
Well,
that was an ugly day.
First off, Thursday’s action qualifies as a high-volume reversal day…simple
as that. I have taught you that this is negative for the short-term at a minimum.
This occurs when sellers get the upper hand after a strong open…almost always
on good news. The good news was AMAT’s earnings.
Here are some thoughts.
The main problem for this market is the Nasdaq. As I have told you, it has been
lagging…and now lagging badly. The NYSE-types are still in fine shape…BUT…the
Nasdaq led the market up…so that brings into question whether it will lead
down.
Everyone is now conditioned for little corrections. Everyone is used to being
bailed out of mistakes as every drop has been bought up and sent higher. Everyone
is leaning the same way. Everyone is sufficiently complacent enough for a correction
unlike we have seen in 11 months.
January’s mutual fund inflows were the highest in history…even higher than
any month in the previous bull.
As I wrote in Monday’s report…
Forbes magazine’s cover was recently entitled “TECH IS BACK: THE 25 HOTTEST
TECH STOCKS.” If that’s not bad enough, I just received Fortune…the front
cover…you guessed it…”10 TECH TRENDS TO BET ON.” These covers
should worry TECH investors as the mainstream magazines report the news AFTER
it has already happened. You did not see any of these covers back in March 2003,
did you?
Since the market’s job is
to fool the masses at their most extreme emotions, maybe, just maybe, it is
time for the market to do its job. Do not be a deer in headlights if things
worsen.
That leads me to the more
important part…the charts.
AMAT leaves one big ugly
tail.
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The Nasdaq topped right at the important resistance I told you about in my
last report. Volume patterns are now very negative as we approach important
support. A break below support will be quite negative at this juncture.
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As far as the Nasdaq goes, at the very least, I would be off margin. At the
very least, I would hold off buying. At the very least, I would be a heck of
a lot more defensive…just in case. I would only consider the highest of quality
and lay off the junk right now. If the NYSE-types join in, you will need to
get that much more defensive. As of this second, they are still in good shape.
Gary Kaltbaum