JUST LETTING YOU KNOW

The Best News I Can Tell You

Of the past many weeks, I have been telling you that there is one constant: The Commodity based areas were in trouble. They were getting hit hard. They sold off and were breaking support… I told you that I would avoid those areas. This went for Gold and Silver, steel, copper, aluminum, metals/mining, construction, machinery, coal…and anything you drop on your foot and it hurts. That never changed. It kept resolving itself more and more to the downside. So that’s been going on. Despite that, the market was acting fine, until the past week or so. Two weeks ago I told you that all of a sudden the rails were getting distributed hard and the Transports were underperforming. Leading to last week, when I told you we were getting distribution, but with growth stocks still acting fine. Distribution means we have higher volume selling. We also had underperformance in the small- and mid-caps, represented by the Russell 2000 Smallcap 600 and the Midcap 400. And then the Semiconductors broke their 50-day Moving Average. I told you that AMAT and a few others were breaking to the downside. And then Financials, which showed some resistance and never got through it, then started to roll over, breaking near-term support. So Financials started to come in. The other thought I had for you was that yields were going higher. I showed you the charts and told you about them. That leads us into this week. Now, amazingly, the powers that be decided to come out with an employment number on Friday while the markets were closed, except for the bond market. So we get the employment number and it was much less than expected. The consensus was to gain around 240,000 jobs and I think we got 120,000. First off, as you know, I think it’s a fake number. I think it’s all a bunch of BS and they don’t know the number. They guess. And there are other things involved such as the “Birth-Death Model” that they play with. But I think the biggest shenanigans over the past 2 or 3 year has been the major decline among how people who are willing to go into the labor force and look for jobs. Because you can make the unemployment number always look better by saying, “more people are no longer looking for jobs now.”  So the divisor changes. And I told you, I can get the unemployment rate down to 5%. Just take a few million people out of the job market. And that’s what we’ve seen. So we’ve gone from 10% to 8.2% on the unemployment rate, but I’ve got news for you. We’re not gaining anything because they took millions of people out the category of “looking for jobs.” It’s called the participation rate. Go look it up. So while I think the job market has gotten better, it is still woeful. And Friday’s number was not very good. Now on top of all that, before we came in to today, the European markets were starting to sell off pretty decently. The German DAX broke below the 50-day moving average. The Paris, France CAC, same thing. So we walked into a gap to the downside today. Now what does it mean? What do we expect from here? All I can do is go through what we are seeing. The best news I can tell you is that growth stocks have hardly been touched. You know the names (

) and that’s the good news so far, and I’m fine with that because frankly, I rarely play commodities and while I’ve play financials in the past, I play them small. Most of the Semiconductor companies do not have good earnings, so I don’t touch them. But, the market continues to get serious distribution, there is one fact and there will be one outcome: Eventually, they’ll get growth stocks and they’ll take them down to a certain extent also. But not as of yet.  LISTEN TO GARY LIVE ON WEEKDAYS 6-7 pm EST Best of Investor’s Edge Saturdays 1-2 am EST 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.