The market finally showed its hand this past week, and it was not a pretty sight. The triangle pattern has resolved itself to the downside. Anything is possible, especially with the seasonal strength and this news-driven environment but I now strongly believe that the recent highs was not just a high but probabilities favor THE high for the recent intermediate-term move off the October 4th lows. I will get into support levels in a bit but first, I want to point out my worries.
For starters, financials continue to act horrid. They topped out way in advance of the market and have led all the way down. In spite of the sharp rally off the lows, many financials have hardly budged off their lows. To make matters worse, I am actually seeing a slew of insider selling at the lows in some of these issues including BAC and WFC.
Many past growth leaders continue to come apart or are putting in major tops. Stocks like Apple,Amazon, Bidu, Priceline…not to mention the crashes in names like Netflix and Green Mountain Coffee worry me. I am a big believer that these growth names lead the market both up and down…and right now, they continue to be gross.
The SOX may have topped out this past Wednesday.
Throughout the rally, the new high list has been anemic and after just a couple of days down, new lows outweigh new highs. This would not be happening if the rally was the start of a new bull market.
World markets continue to underperform the U.S. In new bull markets, it is always the other way around.
So you can see, I am less than thrilled with what I have been seeing in the past couple of weeks but there is more. On a technical basis, all major indices are back below the 200 day moving average with some indices like the Russell and the NYSE never coming close. On top of that, the NASDAQ and the NDX are back below the 50 day moving average with the NYSE sitting on it. Lastly, volume patterns have become very negative as a bunch of distribution days have showed up.
That all said, I am watching the 50 day moving average support levels for several of the indices. A break below will only add to the nausea. The Dow at about 11,510…S&P at around 1206…Russell 2000 at 702 and the NYSE at 7250. The good news remains the calendar. Market action from Veteran’s day to the end of year has been up in 10 out of the past 10 years and 22 out of the past 24. But at the very least, it is going to remain one of the toughest environments I have seen in a very long time. Even if markets do rally some into year-end, we then hit January.
And next up, we have to deal with the scam supercommittee that may or may not cut a small sliver of federal spending. Yup…raise the deficit $5-7 trillion over the next 10 years and cut $1 trillion. Yeah…that’s the ticket. Of course, we also get to deal with the central banks and governments around the globe that created the problems and of course, those same people are going to fix the problem. Yeah…that’s the ticket part 2.
Gary Kaltbaum owns Kaltbaum Capital Management, LLC (“KCM”), an investment adviser registered with the U.S. Securities and Exchange Commission. The opinions expressed herein are those of Mr. Kaltbaum and may not reflect those of KCM. The information offered in this publication is general information that does not take into account the individual circumstances, financial situation or individual needs of an investor. The information herein has been obtained from sources believed to be reliable, but we cannot assure its accuracy or completeness. Neither the information nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. Any reference to past performance is not to be implied or construed as a guarantee of future results.