The Most Important Area for The SPX
I wouldn’t get all twisted but the market appears to be
putting in a mini-top. As I have been saying, Friday, June 6’s high-volume
reversal day probably took the steam out of this latest rally. BUT…and I
repeat, I don’t believe there is a lot of damage to come in the near-term. There
remains too many good-looking stocks and sectors…which could be bought on
lighter volume pullbacks into support. During the bear market, I told you to
sell all rallies. During this bull move, it is buy the pullbacks until things
change. This pullback is not out of weakness…but out of strength. Stocks and
the market itself are way ahead of their moving averages…and usually revert
back to them.
The most important area…and it is not written in stone that it has to get
there is the 945-965 area on the S&P 500.
That is a strong area of support that would take a lot to be breached. Smaller
and mid-cap indices are much stronger and are in much better shape. I would
concentrate on those areas.
So, continue to pull back and take your foot off the pedal. I do believe there
is a better buying opportunity coming. A drop here will work some of the
frothiness off. The speculation has become too overheated…and of course,
bearish advisors are now down to a woeful 16%…the lowest number since
mid-1987. Please keep that in perspective. We are less than 3 months off of a 6
year low on the NYSE and the bears are at a lower number than during 1999-2000.
That’s a scary longer-term thought to me. We shall see.
In the meantime, I still believe you buy the breakouts as most are still working
quite well. Just use your stops a little more judiciously here.
Gary Kaltbaum