This Is Officially a Bear Market
Gary Kaltbaum is an investment advisor with over 18 years experience,
and a Fox News Channel Business Contributor. Gary is the author of
The Investors Edge. Mr. Kaltbaum is also the
host of the nationally syndicated radio show “Investors Edge” on over 50 radio
stations. Gary is also editor and publisher of “Gary Kaltbaum’s Trendwatch”…a
weekly and monthly technical analysis research report for the institutional
investor. If you would like a free trial to Gary’s Daily Market Alerts
click here or call
888.484.8220 ext. 1.
After a nice three day weekend, I am loaded up today. Pay attention!
The Giants beat the Packers…AND THE REFS! Did you see those calls? The refs
have not had a good year. Yes…I am a sore winner. I hate when the refs try to
decide the outcome of games. I will never say another bad word about Eli
Manning.
I am stunned. No…maybe I shouldn’t be stunned…that every politician under
the sun is now jumping over the next to hand out money to the American public.
What’s going on here? Ben Bernanke says that we are not in recession. George
Bush says that we are not in recession. Uncle Hank says we are not in
recession…but here comes the money! These people are insane. The Democrats are
insane…the Republicans are insane. I feel like I am watching One Flew Over the
Cuckoo’s Nest where all the nutcases were sitting around a table playing poker.
I feel like I am watching the Keystone Cops, Laurel and Hardy, Abbott and
Costello, the Three Stooges. Is every one of these people that are in power just
insane or are they just economically illiterate? How is giving money out to the
public just one time going to help the economy? Someone answer this question for
me! What economics book says that you can write ONE CHECK…just ONE CHECK to
the public…and all of a sudden, they will “feel” like spending again? How is
it that this Fed…who created a problem by using excessive liquidity…wants to
cure the problem with excessive liquidity? Did any one of you notice what
happened every time one of these simpletons opened their yaps this past week?
THE MARKET TANKED! So…here is the real and final answer to what is going to
happen to all this money. Excuse me if I missed someone else say this…but I
haven’t. All this money being sent out will go to pay one thing…TAXES! By my
estimation, this money will be received about tax time. So…here is the
program…the government sends out money…and will get it right back. What a
concept! We have finally got to the point that I was afraid we would get
to…when markets did not believe anything the heavyweights said.
Did Ben Bernanke actually say it is important for the Fed to be seen as an
inflation fighter? Hey Ben…since no one believes a word you say, you may want
to consider the following numbers. The 3-month Treasury yield is at 2.85%, the
2-year 2.35%, and the 10-year 3.63%. Fed funds rate is at 4.25%! How much
further can you be behind?
I then watched Bernanke’s performance this week. To be fair, I applaud him
for putting himself on the hotseat. But he instills no confidence. In fact, some
of the things he said nauseated me. He does not think the economy is headed into
recession. Has this dude looked at the charts of Home Depot, Lowes ,Coach, Men’s
Warehouse? Has he visited any stores? He also said he thought inflation is in
check. Is this dude crazy? Has he bought any popcorn, wheat, gas, health
insurance, home insurance, milk, cheese, butter, eggs? Has he paid for any
college? This man is not living in the world I am living in. He then went on to
say that he knows of no tax cuts that have paid for themselves. HUH? Recent tax
cuts paid for themselves many times over as receipts to the government hit all
time-highs recently…but Bernanke ignored all this.
The next shoe to drop will be the downgrades of bond insurers. When a bond
insurer is downgraded, all the bonds they insure, in theory, are downgraded.
There is only about $1.4 trillion of muni-bond securities. Fitch has already
downgraded Ambac! I must tell you…this may be the area where a government
bailout is most needed.
After Obama complimented Ronald Reagan, Clinton and Edwards made fun of
Ronald Reagan. I was going to insert a joke here but this is no joke. These 2
assclowns will do everything they can to undo all of the Reagan greatness if
they have their way.
How’s that global warming going for you in the midwest? And by the way, for
the first time in years, it is so cold in Greenland, the water has frozen over.
Not seeing that reported anywhere!
I urge you to take some time out of your busy schedules and go to my website
at www.garyk.com and read all my reports going back to last February. These
reports will show you that this bear market did not start in the past few weeks
but much farther back. For instance:
I outlined way back in February of 07, FINANCIALS and REAL ESTATE topped and
while the DOW came down and then ramped to new highs, FINANCIALS and REAL ESTATE
could not follow suit. I then called the breakdowns in the FINANCIALS in late
July.
I outlined that when the market topped again in July and rallied back up,
that RETAIL and SEMICONDUCTORS were now joining the FINANCIALS and REAL ESTATE
as areas that refused to rally with the market.
I outlined throughout the whole year that fewer and fewer stocks were
carrying the market and that narrowing markets ultimately lead to bear markets.
I outlined on many occasions that at the end of the day, 70% of all stocks
were already in a bear market and that the normal outcome was that popular
indices would follow.
I outlined that coming into the new year, the market was experiencing its
worst technical condition I had seen in a long time…and that January was
looking worrisome.
I outlined for you the nifty fifty action in the market reminding me of the
72-73 markets.
So…this nasty bear market did not come out of nowhere…rather was setting
up for months. I have been pointing out all the problems for quite a while.
Before I talk short term, (which is much less important than the overall market)
let’s talk about the more important point…and that this is a bear market for
stocks…and in spite of so many continuing to come out to call the bottom and
to say things are a value and things are cheap, short-term bounces aside, this
market is ultimately going lower…maybe much lower. I am down to about 10% of
all stocks in good technical shape. I have not seen this number since 2001. In
just the past week, the market lost most of the groups that were left standing
as FERTILIZERS, AGRICULTURE, OILS and even the UTILITIES were crushed. The
definition of a bear market is when the market comes and gets them all. These
indicators have always been my #1 and #2 indicators as they tell me the health
of the market. Remember how many times in previous months that I told you the
market’s leadership was becoming more narrow by the week. On top of that, all
major indices and all world markets are now trading below their long-term moving
averages. To make matters worse, shorter-term moving averages have now crossed
below longer-term averages…always a signpost of a bear market. To add some
fuel to the fire, margin debt is now contracting and mutual fund cash is very
low. This tells you the ammo to move markets may not be there right now. Lastly,
the fact that the market is so extended and oversold to the downside…and still
can’t bounce…tells you just how weak things really are. So overall, you must
respect what we are seeing. This is not garden variety and if you just sit
there, you are going to feel serious pain. If you have taken action when we
reported all the topped out areas, you have missed this move down. I have been
in 100% cash for weeks…and only looking for shorting opportunities.
Shorter-term may be a different story. First off, I am now seeing a lot of
converted bulls. The more…the better. When everyone turns bearish, the market
gets closer to a turn. Secondly, all the news is being reported as bad. In fact,
I keep thinking I am going to walk outside and see nothing but soup kitchens and
lines around a bank. This type of news does not come out at a top. But the more
important aspect of the market in the short-term is that the DOW is now fully
1000 points beloiw the now declining 50 day moving average. I will guarantee you
one thing. The DOW will eventually catch up to the 50 day by either bouncing
back into it or the 50 day coming down to meet it. I say a combination of the
two will occur. I will even tell you how a near-term bottom possibly plays out.
Expect a day where the DOW is down 200-300 points and then reverses sharply on
heavy volume. That would be your washout where the late sellers panic and
finally get out at the most inopportune time. That washout will then give the
market impetus for a bounce. Just keep in mind, any bounce will be a bounce in a
bear market…and should be played carefully or sold into as odds favor, there
are going to be more legs to the downside before this is over. This washout is
not a prediction but I have studied bear markets. Most legs to the downside in
bear markets end in that fashion.
As far as sectors, just about everything is now in a bear market. About all
that is left standing is miscellaneous BIOTECH, GOLD, HMOS and miscellaneous
MEDICAL. Everything else is in a bear market but everything else is also
extended and oversold and due to bounce.
Gary Kaltbaum