This Is The Only Thing You Should Pay Attention To Now

• April 21, 2005
• Gary Kaltbaum

A couple of “off the beaten
path” items before I talk about this lovely market.

Someone is going to jail. Anybody see
Archipelago (AX) trade way up on volume before it stopped trading to announce
they were being bought out. You would think after the Martha Stewart exploits,
someone would find religion. But greed, unfortunately is too strong of an
emotion for some. Just amazing that there would be such stupidity and someone
would trade with insider information. Just boggles the mind. The Feds must 
already be all over this.

 I urge you to get Wednesday’s USA TODAY. The
MONEY section had a front cover article on the Condo boom in Miami. If any
article is an indication of the coming burst of the bubble, it is this one.
Once again, when prices go too high and too much inventory is built, say
night-night. It will be quick and painful. It has happened every time.

Do you need any more evidence of what I have been
telling you? Do you need any more days like Wednesday to understand we remain
and odds favor, will continue to remain in a bearish market environment? The
amazing thing is every investor, every strategist and every market watcher has
the evidence right under their nose…but continue to ignore it. I figured
after all the CSI shows, someone would figure out that the market has its own
characteristics when things are good and bad.

Nothing has changed. In fact, this market is even
weaker than I thought. It cannot even muster more than a day’s bounce before
rolling over again. So just for your edification, here is the evidence I am
seeing…and it’s all I need.

There has been only high volume drops and low
volume bounces.

Longer-term support was broken on heavy volume.

Advance/decline figures are gross. Even when the
DOW was up 50 points on Wednesday, decliners led advancers by a wide margin.
As I have told you, this type of negative divergence gives the market no
chance.

All major indices are below their short-term and
long-term moving averages.

I have 3 sectors out of about 200 that are still
in uptrends. The rest are in definable downtrends.

World markets are now getting hammered. I had told
you that the only bright light was that they had held up while our market was
getting hit. Not anymore! Keep in mind, foreign markets, especially emerging
markets, have a lot less liquidity than ours…so they will buckle badly if
this continues.

Good news is sold off and bad news is destroyed.
Did you see all the cheerleaders telling you that TECH is back because of
Intel’s numbers? Have these people forgotten that the NASDAQ is in a
downtrend, is over 60% below the highs of 2000 and valuations are still a
joke…but TECH is back. Did you see them go ga-ga over Yahoo’s numbers? Are
these people forgetting that Yahoo trades at 80x earnings?

I have told you to be careful about everyone
talking about sentiment. Wow! Every two minutes, I am hearing that the market
is oversold. Let me repeat. Pay no attention to this. In bearish phases,
sentiment is much different. That is why the market can’t budge even though it
has been oversold for days. You are now hearing the word “capitulation.”
Fuggedaboutit. Let them use the word capitulation until the cows come home.
Just realize Wall Street has a major bias to the bullish side and will try to
come up with any elixir to fix things up. Only pay attention to price and
volume…and again, until we see…until we start to see any type of
accumulation, you must take the most defensive posture possible.

There are going to be bounces…even strong
bounces. Be prepared for them. Until I see specific proof that the market has
found A REAL LOW…I am not biting. There are just too many bad charts and not
enough sound bases to dive in if one occurred.