JUST LETTING YOU KNOW
The theme stays the same. The market’s under real pressure here, though it’s split tape. And interestingly enough, we’re always looking for changes. What I mean is areas that are completely ignored and then, all of a sudden, they bottom regardless of market conditions. And then they start to get going. We’re also looking for changes where things are topping.
Let me give you a good example we gave you this year.
We literally gave to you, to the day, when we thought the discount stores, such as Dollar Tree, Ross Stores and the like – were topping. They’re getting bludgeoned now.
I’m just letting you know that I’m seeing some underlying relative strength, continuing now (this is something I’ve been talking about for three weeks) in the commodity areas. What I mean by that is they go u, then come down and they’re not breaking the low anymore. And we’re starting to see a few names starting to turn up. Specifically, take a look at the coal stocks:
The coal stocks. Look at ACI up on 2.5x average volume. And again this goes away from when I talk leadership. ACI’s high in 2008 was 77. In 2011 it was 37. It’s at 8 right now. But I’m just noting that for the past few months, it found an area it did not want to go lower than and it looks like it’s starting to get above first resistance areas. That’s how something bottoms.
You can look at BTU, another coal stock. You can look at ANR another coal stock. And I think CNX. And WL, to a little bit of a lesser extent.
And you will see that this group looks like it has found an area after just getting trashed. And we can go into why…this talk about Obama and his policies. And maybe has to do with Romney winning the polls right now and maybe they turn right back down if Obama wins…I don’t know.
So as these things appear, we’ll mention them to you. Typically, I do not jump on these things. Earnings are way down, in some cases revenues are way down. We like stocks in leading groups, but we also want to let you know when an area of the market has stopped the ugly.
On the other end of the spectrum, I don’t like the action in the market. We’ve talked about distribution for the past 10 days. It really started to rear its ugly head recently and a lot of names are getting into some serious trouble now. It is incumbent on you to be reviewing, especially ones that have had big runs because when they get in trouble after a big run they’re usually over-owned and over-loved and there’s only one thing that happens after that.
When something breaks the 50-day/10-week moving average, it’s got to be up for review. There are plenty of situations when that area is broken and it gets back up. So you have to give it a little bit of a chance. I wouldn’t give it a lot of a chance. Because they’re starting to stick some things in the teeth now in this market. We’ve talked already about the Nasdaq and Nasdaq-100. They are below the 50-day moving average and even today, they were up and they finished near the lows of the day. Not the greatest of signs.
The Russell 2000 is sitting on the 50-day as we speak. The Small-Cap 600, got a little bit above it and finished below it today, but under Distribution.
The Semiconductors continue to act like the south end of a northbound mule or, a better way to say it: The New York Mets bullpen.
And, last but not least, the Transports really don’t have a big life, though – a little news out of Fedex yesterday helped them out a little bit. But still, a lagging area.
So, a lot of jello moving on the plate. And plenty of deterioration underneath the surface that does not get reported elsewhere, but does get reported here.
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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.