JUST LETTING YOU KNOW
I got a bunch of emails today asking, “How did the market go up 200 points today Gary?” And my answer is, “Because it went down 1100 points. That’s what happens.
When you go down, you are always going to bounce at a given point. Really, here’s the only question. Is this…
- A low?
- The low?
- Or just a stop on the way down?
We don’t know. That’s really the answer.
Monday’s volume was decent, but lighter than Friday’s. The Dow did not finish above the 200-day moving average. The Nasdaq did not. The Nasdaq-100 did not. The Russell 2000 did not. The Smallcap 600 did not.
But the S&P, at the close today, finished just a smidge above.
We’ll take it.
If you have been listening to my show for many years, you know we have a theme and a thesis to bear markets.
Bear market rallies are sharp, quick, loud, big, noisy, make you feel good, get people talking about them.
They suck you in and then bury you soon after.
If we’re in the midst of a bear market, that’s going to go lower, today fits in.
That’s all. But notice the “If.” I’m not saying anything. I’m saying “If.”
There’s still a clear lack of leadership in the market. There’s hardly any new highs in the market. There’s been a lot of technical damage down in the market. And just because the Dow drops 1100 and rallies up 200…in itself, it’s not the greatest thing in the world.
So we need a few more cards coming out the deck. And we’ll keep our fingers crossed that the low is in. Could be. The market will do whatever it wants to do.
Just remember, it’s all about fear and greed. Friday’s turnaround gave rise to today. We gapped up 100 a hundred points today and never really gave back anything throughout the day.
The best thing for the market now would be for to sit a few days and not go up nicely another day. You want backing and filling now. That will be constructive technical action.
The Apple Scam
And, of course, in those same emails, I got the usual, “Wow! How did Apple go up 38 today?”
Well it went down 200, recently. And that’s what happens. You guys have lived through bull and bear markets. And you know that when something gets hit hard, it’s going to bounce. And interestingly enough, Apple had no respite on the downside since about 650. It went from 650 to 500 until Friday.
During the past couple of days in Apple, you know what we’ve noticed? All the negative articles on Apple. My, it’s interesting how they come out after it’s already down 200 points. Now, I don’t care about that. What I care about on Friday, the news was that John Boehner came out and said they had a constructive meeting with the President Obama on the Fiscal “Stiff.” And immediately, the market started to bid. And it wasn’t up that big…I think the Dow finished up 45 on the day. The Nasdaq was up 16.
But here’s what happened on Friday – very important you know this:
- Massive put buying betting on the downside – the most massive number since June.
- We actually had what is known as a turnaround in which the market’s down, then finishes up. Important stocks down and then they finish up. Volume was heavy. I know it was an options expiration down, but we don’t rationalize things.
- Apple itself, after being down 20, finished up a couple bucks.
This types of turnarounds on volume, at the most inopportune time, after a big drop, usually lead to some upside testing. Simple as that. It means all those sellers were washed out after a big drop. And I can mention to you that Apple actually undercut the May low which was 522. But that’s really beside the point. The main point is that you had a big wash out on Friday, which as I’ve taught you for years, led to upside testing.
The other part of the equation is that it’s very wide and loose action now. What is wide and loose action? It’s not what you want to see. But we’ll see. Their sales and earnings have decelerated over the past couple of quarters. It remains to be seen how the next quarter is. If I was a guessing man, I think a good low was put in Friday, when you add in today. What is that mean? Is “The low?” I definitely don’t know.
Now let me tell you the scam today. In case you don’t know, the big fundies are neck deep in Apple and what you have seen in recent weeks was a liquidation by a lot of them. But they’re still neck deep. I read about some funds that have 70% to 80% of their money in that one stock.
Let me tell you the scam on Wall Street. So you’re an analyst and you have a big buy on a stock like Apple and you watch it go from 705 down to 505. “Oh my God!” And, of course they have clients that depend on this analyst. And they’re getting their “a**” kicked over the past few weeks. What does the analyst at Merrill Lynch do today?
Oh, he cannot raise it anymore because he’s already got big buy on it. What does he do? He takes his target from 780 to 820. A 500 stock…he raises it from 780 to 820. It’s a scam. It’s a game to induce people to buy the stock. And let me tell you, if Apple’s starting a big bear this rally will do nothing more than set up for more selling. And it’s this chicanery and shenanigans by Wall Street that really irks the heck out of me.
If I was running the SEC and I saw that, I’d be on the phone with that dude that day, asking for an explanation on why, 200 bucks away, you raise your target. To be clear, if I met this person, I’d look him straight in the face and call him a liar and a creep.
I bring this up because I see this all too often on a stock that has had its major top in place, only to bury an unwary public. I don’t know if Apple is done. It could go to 1000 for all I know. It could go to 300 for all I know. I just know analyst is a creep and that one irritated me.
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.