These Charts Speak For Themselves
I must say, I am going to make this an annual pilgrimage. Went snowmobiling
deep into the mountains and have never seen such beauty. This is
definitely God’s country out here. And to make things even better, they love
their FOX NEWS CHANNEL . I can’t begin to tell you how many have walked up to
me to tell me they love the business shows…and the good news is that I was
told I am not as fat as I look on TV. Now…on to this lovely market.
tee…and the negative action we outlined for you is now gaining teeth. Before
I get into the technical condition, here is what the FED said in the meeting
on Tuesday:
federal funds rate by 25 basis points to 2-3/4 percent.
The Committee believes that, even after this action, the stance of
monetary policy remains accommodative and, coupled with robust underlying
growth in productivity, is providing ongoing support to economic activity.
Output evidently continues to grow at a solid pace despite the rise in
energy prices, and labor market conditions continue to improve gradually.
Though longer-term inflation expectations remain well contained,
pressures on inflation have picked up in recent months and
pricing power is more evident. The rise in energy prices, however,
has not notably fed through to core consumer prices.
The Committee perceives that, with appropriate monetary policy action,
the upside and downside risks to the attainment of both sustainable growth
and price stability should be kept roughly equal. With underlying inflation
expected to be contained, the Committee believes that policy accommodation
can be removed at a pace that is likely to be measured. Nonetheless, the
Committee will respond to changes in economic prospects as needed to fulfill
its obligation to maintain price stability.”
Notice the words I put in bold print. These words were the exact reason
for the selloff Tuesday in both stock and bond markets. I believe the market
is worried that the FED is once again late in the game with their thinking.
Maybe Greenspan doesn’t pump his own gas, buy his own eggs or pay for health
insurance…that would be his only excuse for recognizing this late that
inflation is in the system.
Technical thoughts:
The NASDAQ and NASDAQ 100 fell below their longer-term and all-important
200-day averages. We told you they would be the first to go and that’s
exactly what happened.
^next^
The DOW and S&P are now feeling the pain. It is a distinct negative that
FINANCIALS are leading the way down. The following charts speak for
themselves.
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Whether we get a bounce here or not, the broadening top for the market
continues. I will repeat that the market is oversold in both sentiment and
price but I will also repeat that sentiment is much different in bad markets
than in good. Oversold becomes more oversold and bounces only lead to lower
prices. Be careful because in the coming days, you are going to hear the
word “oversold” more than the word “steroids.”
I have been asked 1000 times in the past week of what this action could
lead to. I don’t know…but I am sticking with the 10% drop in the DOW and
S&P and 20% for the NASDAQ. We will then re-evaluate. Whether it turns into
something worse is anyone’s guess but let me be clear…this market has the
making of the start of a bear phase unlike we have seen in a couple of
years. We will just continue to play it day to day by reading the price and
volume action. The market does not have a chance if we continue to see more
high volume selloffs in both stocks and bonds.
Gary Kaltbaum