The Positives Vs. The Negatives, Plus, What Insiders Are Doing
As
I told you last week, I expected to see seasonal strength in
the past holiday week BUT once again, the market
showed its ability to hold support right where it needed to…and the move was
much stronger than I would have expected. I also went on to tell you that the
week after Thanksgiving is the one I will be watching.
The most important happening
off of last week was the market’s ability to hold at or near its 50-day moving
average…once again. A chart of any of the major indices can show what I am
talking about. On several occasions, the market has teased the first real intermediate-term
correction…and then turned straight back up.
Let’s start with the negatives
I mentioned last
week…because they are still out there.
Breakouts are just not working
like they were in recent months. Either stocks are too extended or are breaking
down. I am not seeing as many quality bases as before. Time could take care
of that.
Insiders are selling at
a clip that has never been experienced. Over 50-1 sells vs. buys. Insider action
is usually a lagging indicator by about 6 months. Thus, things can get interesting
next year. I am amazed by some commentary to not worry about this action.
This rally is already 8
months long. That in itself is a problem. BUT…notice
how the lion share happened in the first 11 weeks of this rally. In fact, the
S&P 500 has hardly moved since mid-June. It has been a small-cap affair.
Sentiment is still horrid.
I have always believed that the too-bullish sentiment will eventually come back
to haunt the market. Do you know of any bears? I don’t.
“Good news” is
no longer being bought. In fact, the market sold off the monster GDP numbers
as well as positive reports from companies like Cisco
(
CSCO |
Quote |
Chart |
News |
PowerRating) and Home Depot
(
HD |
Quote |
Chart |
News |
PowerRating).
This is in stark contrast to recent months.
While there is still a good
number of leadership names still leading, there has been enough deterioration
in names like
(
ERTS |
Quote |
Chart |
News |
PowerRating) and others that warrant watching.
That leads to the good news.
Most stocks are still in
fine technical shape. I would guess 7-8 out of 10. Markets usually don’t come
undone when so many stocks have good technical patterns.
Major averages are still
way above longer-term moving averages.
SEMICONDUCTORS
remain strong. If there is one sector that is a leading indicator of the market,
it is the Semis.
The NEW
HIGH LIST remains quite large while NEW LOWS
are non-existent.
The last point I want to
make is how much the small-caps continue to outperform large-caps. While the
S&P and Dow
have been basically marking time since mid-June, the Russell
and smaller indices continue to roll.
I will be watching this
week closely. In the recent past, the market has been strong coming off of a
holiday. In any case, I would rather see stocks do more work consolidating and
then breaking out of new bases, before getting real excited again.
Gary Kaltbaum