These Stocks Are Acting Well, But That Isn’t Necessarily Good

  • January 21, 2003
  • Gary Kaltbaum



In my last report I wrote about more and more stocks breaking their moving
averages. Guess what? You get enough names breaking these averages
and eventually…the indices follow. That’s exactly what happened on Friday as
all major indices have now sliced through their 50-day averages.

Here’s my take.

At best, if the market holds here, I expect a bounce, but more than likely a
bounce not to move above the highs of the past two weeks…and in the Nasdaq’s
case, to not even get close.

But if a
bounce does not happen and more weakness ensues, I expect a drop into vital
support at 870 on the S&P 500, Dow 8300 and Nasdaq 1320-1327. It would be at
that point where the “rubber meets the road.” If those levels don’t hold, as I
have said before, there is no underlying support all the way down to the July
and October lows. This doesn’t mean the markets get there…it just means it
will be easier to get there. In any case, you should be quite concerned about
these levels.

Other thoughts:

  • The
    SOX…which I have been telling you to
    watch closely as the market has been following on a leash…is now toast…and
    technicians can now argue a head-and-shoulders near-term top is in the offing.
    Next important support lies at 280-285.

     

  • Too
    many $5 and under stocks in the speculative INTERNET,
    BIOTECH and
    TELECOM     arena are acting too well. I have been arguing that this is
    unhealthy and that too much speculation at this juncture is a negative.

     


  • MICROSOFT’s split and dividend
    announcements are a case of “less than meets the eye.” Why would a company
    with arguably the most liquid stock in the market split its stock when it is
    at $55? I believe the answer is to hide their less-than-stellar numbers. It is
    my belief that in an effort to keep Wall Street positive on its stock,
    Microsoft announced its split. They forgot that splits do not work. Do I hear
    the word doofus? Their dividend at under .3% is laughable. Of course, not if
    you’re Bill Gates who stands to pocket almost $100 million/year and possibly
    tax free.

     


  • BROKERAGE     stocks are acting like death. How
    about a glance at
    (
    AGE |
    Quote |
    Chart |
    News |
    PowerRating)     and
    (
    RJF |
    Quote |
    Chart |
    News |
    PowerRating)    ? BROKERAGE stocks are a pretty good
    proxy for the market.

     

  • I am
    finding less quality bases as many setups have become set-downs over the past
    week.

     


  • Sentiment is still far too bullish. This has been one of the main reasons I
    have been skeptical. New bull markets never start when every one is
    bullish…and I mean never.


So, continue to go slow.
I know I have said this a zillion times over the past few years…but they are
words well taken.