JUST LETTING YOU KNOW
The Correction Deepening
When we discuss with you how things typically happen, it is based on the sum of all the parts of how bull phases and bear phases work, how tops and bottoms usually form and so on.
And really the most important thing I have told you in the recent past was that the Nasdaq was leading down and how the Nasdaq is the leading index, both up and down. It was something that had to be watched.
You combine that with the other part of the equation and that is that Leading Growth Names that had been leading the market are getting slaughtered.
And that’s what we’re getting here.
On top of this, in recent weeks I have told you that expectations of earnings and sales growth for this quarter year-over-year – were not very good. But I basically gave you both sides of the coin.
- Maybe the fact that expectations are low will help things if companies beat and down guide down OR
- We just croak.
We’re getting some of the croak. And ladies and gentlemen, it is based on…for me…the most impactful part of the equation and that is, earnings and revenue growth and guidance going forward.
We are getting some serious nauseating guidance out of some very important names that do business on a global basis. Now whether this lasts or not, I don’t know.
I’m just letting you know.
Now something else happened today that I think possibly can be part of the equation. As you know I am of the belief that our Federal Reserve, Mr. Bubble Ben Bernanke has been on the war path. And that is to rig markets, to control the Bond Market and send asset prices higher by printing new money. And when you print new money chasing a fixed amount of assets, the price of the fixed assets go up.
Now it worked on QE1.
It worked on QE2.
It worked on Operation Twist.
That led to the latest. I call it Quantitative Easing…I call it Ad Infinitum…an open ended printing of money for whatever reason.
Interestingly enough, the markets are now down since that maniacal maneuver and it’s starting to go down pretty decently.
So that poses the question, is the market taking a certain finger and sticking it up in the air at Mr. Bubble and saying, “We’ve had enough of you.”
I don’t know.
There’s also a rumor that Mr. Bubble will not go for a third term and maybe that’s doing a little trick, I don’t know.
But here’s what we do know. The Nasdaq has been acting awful recently, leading the market down, while the Dow and S&P pulled back to the ascending 50-day. The Nasdaq had broken the 50-day and only rallied up into it.
And if you have listen to my show, the definition of the start of a bearish phase is when something is in a bullish mode and then breaks below that all-important moving average and then starts to fail to get back above on several occasions.
Every move back to the moving average is at a lower price…a lower high. Thus, this bearish phase.
The Nasdaq, first time, went up into it and is sinking off of it badly.
Now of note with the Nasdaq is that Apple, Amazon and Google are a big percent. They mattered on the way up and guess what – they matter on the way down.
Google stock has been trashed.
Amazon’s been hit hard.
And Apple has gone from 700 down down to 614 at the close today. Apple, the last there days has gone up 22, down 22, up 22, down 20. Not sure that’s a good sign either.
So, all in all, the market remains in a corrective phase. It’s gaining some teeth there. Most growth leaders have broken. If you have one that hasn’t, you should feel lucky. And most importantly, several Dow names (higher priced names) look like they have topped and topped badly on earnings.
And why do I use the words “higher priced?” Because they have the most influence. If you haven’t heard, Alcoa is in the Dow. If it goes up 10%, the it would influence the Dow by about 7 points. If IBM moved 10%, it would influence the Dow by about 170 points. So when the higher priced names are getting hit, you better wake up.
And of note, Chevron, Caterpillar, IBM, and 3M all reported less than stellar numbers as well as less than stellar guidance and all are getting smacked around.
Not good at all.
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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.