We may bounce, but this is more important
Gary Kaltbaum is an investment advisor with
over 18 years experience, and a Fox News Channel Business Contributor. Gary
is the author of
>The Investor’s Edge. Mr. Kaltbaum is also the host of the nationally
syndicated radio show “Investors’ Edge” on over 50 radio stations. If you
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One newsletter writer and money manager writes:
“If you have any cash, invest it right now,” he wrote. “The next few weeks
will be phenomenal.”
Another research firm says “excellent buying opportunity.”
An author…who has been woefully wrong in the past writes that the past 20
months of flat returns in the broad market indices have just about done their
job of lulling investors to sleep in advance of a gigantic rush to much, much
higher ground. His prediction: 40,000 DOW in the next few years. Yes, ALCOA,
GM, VERIZON AND SBC COMMUNICATIONS will quadruple. Yes, companies with zero
growth rates will quadruple. Methinks he has some books to sell.
I bring all this up because you need to keep focus. Maybe a great buying
opportunity is at hand. Maybe the market is going to pull up its bootstraps
right here and rifle to new highs. I am good with that. I do believe anything
can happen. I will just do things differently…and that’s to listen to the
market for clues, not someone’s predictions of where things are going to be
down the road. Just keep in mind, there is a vast wasteland of people who have
tried to tell you where things are going to be 1 year, 3 years even 10 years
from now. I don’t know what I am eating for dinner tonight.
On the other end, the same permabears who have been telling us that the Dow is
going to 500 and the next great depression is at hand are still yelling every
time the Dow has a down day.
Shorter-term, the market’s selling looks to be drying up…which will lead to
some sort of bounce. Hey, a bounce would be normal about now. I also get the
feeling that the market’s recent action is about as bad as it could get on a
near-term basis. But as I have said before, that is the trees. The
shorter-term squiggly movements are just that. Keep your eye on the more
important characteristic of this market…and that is it is trading below all
longer-term moving averages while most charts look like horror shows, extended
to the downside near-term…but horror shows.
I think a bounce is in order because:
OIL PRICES are continuing lower. I have to believe that could provide some
cover. OIL STOCKS continue in their bearish phase and should be ignored for
this second.
The BOND MARKET feels sold out. In the past couple of week’s, long-term rates
have been spiking.
After the recent bungee jump, the SOX
(
SOX |
Quote |
Chart |
News |
PowerRating) found some footing yesterday
and just feels like it could have a bid.
Most stocks are stretched to the downside from their moving averages and
normally bounce back up into them. In a bullish phase, stocks get extended to
the UPSIDE and PULL BACK into them.
Bounces can last hours or days. I am not going further than that. Those that
follow my discipline really do not have much to do as just about all
leadership has been obliterated, the NEW LOW LIST has expanded to multi-month
highs and the NEW HIGH LIST…what NEW HIGH LIST? If a REAL low is to be put
in, I expect some repairing of the recent damage so bases can be formed. Then
we can start talking.
Lastly, the government came out with their inflation numbers which basically
said inflation is low. At this point, I can only think of several things: The
Tooth Fairy, Bigfoot, The Loch Ness Monster, pigs flying, the Mets winning a
World Series, the Knicks winning an NBA Championship…I think you get the
idea. And the government wants to know why there is so much mistrust of them.
Gary Kaltbaum