THE OUTCOME OF CHURNING!

On Thursday, I told you the market was starting to churn. In other words, lots of trading without progress. This usually leads to downside. Some have said that was wrong because Friday was an up day. Maybe it was an up day for a few indices…but for the small-caps, the mid-caps, lots of churning was going on.

So we walk into another big gap to the downside. Europe being blamed. Obama being blamed. Does not matter to me. Markets rallied back up into resistance and then churned. It would be classic to pull back from this area. I would like to tell you what is next but things remain very random but in the bigger picture, my thesis remains the same. The market is going to continue to produce a tough environment for all to play. You will go home feeling bullish only to be sold off the next day. You will go home feeling bearish and walk in to a big gap to the upside. But the bottom line, markets here and around the globe remain under both short and long term moving averages. Until that changes, nothing good will last.

Leadership has been in utilities, food, drugs, beverages, auto parts retailers, discount/dollar store retailers and gold…all defensive areas. Take that as a hint.

 

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.

IF I DIDN’T KNOW BETTER, I WOULD THINK HE WAS TRYING TO LOSE THE ELECTION!

Let’s see, just lost a house seat held by the Democrats for the past 88 years. Lost the “no way we can lose” Ted Kennedy senate seat. Lost the house in the last election in a huge way. Lost the New Jersey governorship. Poll numbers are way down. Leadership numbers are way down. The Jewish vote is running away. Independents are out of here. Unemployment is way up. Poverty is way up. Deficits have exploded. The tea party is created. Our debt has been downgraded. His own party is telling him no. His own party is writing op-eds for him not to run. What is a President to do? Yes…come up with the most onerous tax and spend plan one can possibly come up with. So onerous that when the Dems had both houses, they would not have even put this bill to a vote. And you do recall that all these tax proposals were floated during the two years the Dems had unfettered power? So onerous that Dem leaders are tabling it while the President says it must be passed now. So onerous that the Dems know if passed, they are even more toast next November. So why? Why would the President propose this bill knowing his own side doesn’t want it…knowing it has zero chance? One could say it is to use as leverage in the next election. But as I stated, many Dems are completely against it which will provide cover for the other party. So why?

IT’S WHO THE MAN WAS, IS AND WILL BE!

I was told many times to give this President a chance. Just because this President put out an $800 billion stimulus after saying he would not treat taxpayer dollars as monopoly money, I was supposed to give him a chance. I knew better. I knew his thoughts. I knew his past relationships. This President just likes spending and likes high taxes. This President likes regulations. This President likes control. Just remember my thesis on him…spend us into oblivion first…tax later. So we head into an election year…and what does he propose?

ANOTHER $450 billion in spending…in addition to the $800 billion…in addition to the $400 billion…in addition to all the deficit spending…and for what?

Infrastructure? What happened to all the infrastructure spending from the first stimulus? I guess it just wasn’t that important because there is plenty of that money still unspent. Of course, only now is it finally important. In case you did not know, there are already dozens of transportation programs to pay for this. There are zillions of toll roads to pay for this. You know what I am talking about NYC. How about all the diverted transportation money that now goes to museums and such instead of roads?

School construction? If this is so important, why was this rejected by the Democrats in the last stimulus bill?

Green jobs? Do I need to tell you about the recent scandal that is just blowing up?

I can go on but it would be overkill. The President proposes to pay for all this with a litany of additional taxes…and this does not even include what is going to be called the “Buffett Rule!” Since I like Mr. Buffett so much, I am not going to go there anymore. I almost feel bad for Mr. Buffett that he is now being used to try confiscate more dollars to pay for this President’s inefficient and over-the-top spending ways. Imagine, policies that have put this country on its back with deficits as far as the eyes can see…deficits that would take almost 8 years of taxpayer dollars to pay off…yet let’s wash, rinse and repeat. He cannot be this crazy. Taking hundreds of billions more out of the economy to pay for things that just do not work in creating anything and have never ever shown to work is insane.. Lowering deductions for charitable giving? How is that going to go over? Why would he even go there? Why make more people angry? Why affect the soup kitchens, the foundations and all the good work charities provide?

The good news is that this plan is DOA. Frankly, in order to be dead, you had to be alive at one time. I just don’t get it. I don’t get it at all and from what I am seeing, even the friends of this President don’t get it.

So what gives? Is he just trying to lose the election and move on to the ‘I am going to make a zillion dollars giving speeches and writing books” routine? There cannot be any other answer…can there?

 

 

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.

ALREADY CHURNING NEAR RESISTANCE

Just a short note to let you know markets are already churning as they move into resistance. Somewhat normal…but this remains a very tough environment as the moves are sudden in a very news-driven environment.

 

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.

CONTINUED STRENGTH

Yesterday, I told you that I thought market was going to head higher in the near term. I saw several things. I saw that support held at the bottom of the wedge. I saw that the all-important Semiconductor index was getting the bid and saw Retail also perk up. In case you didn’t know, I put a ton of weight on the action in the Semis at all times as they have been leading markets up and down for ages. The group is doing it again.

I would also add now that the Transports also looked to have carved out a low…and a quick glance at every major index shows they have held recent lows for the past 5 weeks. So…maybe, just maybe a good low is in. Only time will tell. I am not that smart. I just think the market is getting defended in here.

Other things I am noticing:

Strategists are now finally lowering their targets for the end of the year. This is actually good news.

The Sox is back above the 50 day. This is where the Sox has failed for the past few months so it bears watching.

The German Dax finally had a good day. As I have told you, the Dax is the one foreign market I follow most as it has also led both up and down.

Do notice that not once did I say THE low. Bear markets do go through a series of ups and downs. There are plenty of rallies during a bear. I am just hoping that after an 18-24% drop in the major indices that the market has said it had had enough. It is too early to tell…but near-term, I like what I am seeing. Of course…do not blink!

 

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.

No wonder our deficits are massive…

No wonder our deficits are massive.

The message: To avoid slowing the economy even further, the deficit must get worse before it gets better. Insanity rules!

CBO chief warns debt panel spending cuts could slow recovery – TheHill.com

TRENDLINES AND SUPPORT HOLD YESTERDAY

There are times I am bullish. There are times I am bearish. There are times where I think markets are in no man’s land just being moved around by the news du jour. I think we are in one of those times. I think we could go higher here as the lower end of the wedge the market has been forming held almost to the penny yesterday. Also, I am seeing some relative strength out of the all important Semiconductors and Retail. Those two areas are vital to the health of the market. Add in the fact that major indices are still stretched away from their moving averages…and again, I think we can rally some.

When markets are in no man’s land, I simply take a step back and watch until the next big set-up shows up. The big picture still has some major issues but for now, it “feels” like the market made a big save yesterday. The problem is the past few weeks have been as tough an environment to trade as I have experienced. One cannot go home feeling secure about the next day, let alone the next hour as the intraday moves have been sudden. I do not think there have been many news-driven environments like this…and now we have to deal with Europe every other hour.  I think it is going to remain tough on a daily basis but thinking the bias for the near term is to rally back towards moving averages. Just don’t blink!

 

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.

DON’T BELIEVE A WORD IN THAT SPEECH!

The following are selected quotes from the recent Obama job’s speech. In the bold is my answer to each. Sorry for some of  the sarcasm. I can’t help myself.

“These men and women grew up with faith in an America where hard work and responsibility paid off. They believed in a country where everyone gets a fair shake and does their fair share — where if you stepped up, did your job, and were loyal to your company, that loyalty would be rewarded with a decent salary and good benefits; maybe a raise once in a while. If you did the right thing, you could make it. Anybody could make it in America. For decades now, Americans have watched that compact erode. They have seen the decks too often stacked against them. And they know that Washington has not always put their interests first. ”

“Sorry. I don’t buy it…and don’t you believe it. Anyone can become anything they want to be in this country.    I have taught my children that if they work hard and become great at something, it will pay off. I still believe it in every way, shape and form and will keep teaching it. That type of talk is there to make you believe you need them. You don’t. That type of talk is from people who love a nanny state.”

“The people of this country work hard to meet their responsibilities. The question tonight is whether we’ll meet ours. The question is whether, in the face of an ongoing national crisis, we can stop the political circus and actually do something to help the economy. The question is — the question is whether we can restore some of the fairness and security that has defined this nation since our beginning.”

“The ongoing national crisis is centered in Washington. There is nothing fair about spending the next 8 years of taxpayers dollars before they have been earned. There is nothing secure about the mishandling of these precious dollars.”

“Those of us here tonight can’t solve all our nation’s woes. Ultimately, our recovery will be driven not by Washington, but by our businesses and our workers. But we can help. We can make a difference. There are steps we can take right now to improve people’s lives.”

“Who are you trying to kid? Everything you do is about Washington controlling lives. You do it with regulations. You do it with your out-of-control spending. You are an impediment to business, not a help.”

“And everything in this bill will be paid for. Everything.”

“And you will go line by line…cutting waste. And you will not treat taxpayer dollars as monopoly money. And you will be fiscally responsible!”

“Pass this jobs bill, and we can put people to work rebuilding America. Everyone here knows we have badly decaying roads and bridges all over the country. Our highways are clogged with traffic. Our skies are the most congested in the world. It’s an outrage.”

“The outrage is that the monstrous stimulus bill was supposed to go a long way toward the infrastructure of this country. Of course, you recently stated that maybe “shovel-ready wasn’t so shovel-ready!” But NOW it is ready?”

“Pass this jobs bill, and companies will get a $4,000 tax credit if they hire anyone who has spent more than six months looking for a job. ”

“Again, do something and get something. Not the way it is supposed to be. Of course, why would anyone now hire someone who is out of a job less than 6 months? This is a silly and amateurish proposal.”

“Pass this jobs bill, and the typical working family will get a $1,500 tax cut next year.”

“More gifts! Yummy!”

“The American Jobs Act will not add to the deficit. It will be paid for. And here’s how.The agreement we passed in July will cut government spending by about $1 trillion over the next 10 years. It also charges this Congress to come up with an additional $1.5 trillion in savings by Christmas.”

“You really think Americans can’t add. Cutting $2.5 trillion from additional $10 trillion in deficits just has the deficits going up another $7.5 trillion. THERE AREN’T ANY CUTS! We get it. Stop!”

Now, I realize that some of you have a different theory on how to grow the economy. Some of you sincerely believe that the only solution to our economic challenges is to simply cut most government spending and eliminate most government regulations.”

“Let’s see. Yearly, federal spending has jumped from $2.8 trillion to $3.8 trillion under this President’s pen. Do I need to repeat those numbers?There is no such animal as cutting government spending. I know of no one…absolutely no one that says we should cut most of government spending and I know of no one who wants to eliminate most government regulations. Again sir, enough! Some of us are smart!”

“Well, I agree that we can’t afford wasteful spending, and I’ll work with you, with Congress, to root it out.”

“You said you would do this when you had both houses…and instead you spent like Paris Hilton on Rodeo Drive…so to repeat…stop!

President Kennedy once said, “Our problems are man-made –- therefore they can be solved by man. And man can be as big as he wants.”

“Unfortunately, those problems are emanating from Washington. The men and women in Washington are responsible for where we are. Average Americans did not spend us into oblivion. Average Americans did not pass rules enabling Fannie and Freddie to give out loans to anyone who can breathe. Average Americans did not spend $1 trillion on Iraq. Average Americans did not give $500 million to a solar company that was losing a ton of money before they got the government guaranteed loans. Average Americans did not allow banks to leverage their balance sheets into the ozone. Average Americans did not come up with a weak dollar policy causing commodities to soar. All average Americans do every day is work their rear end off to make a better life for themselves and their families. In turn, you keep putting impediments in front of them by telling them what they can have and what you are willing to give them. You may think it is good to raise taxes on the “privileged few” but I have news for you, raising taxes does not hurt the wealthy…but raising taxes prevent others from becoming wealthy.”

THE BOTTOM LINE

There is absolutely no permanency in this proposal. Just more spending of taxpayer dollars…taken from some and given to others. Just more of government getting in your way…directing you to do things instead of just getting out of the way. There is absolutely no reason for anyone to hire more because of this proposal. There is absolutely nothing pro-growth about this policy. The only thing it will do is instill in the minds of the business community that this administration still doesn’t get it with businesses continuing to sit on their hands. It is obvious that this administration has not heard the cries to just lay off. I guess people like Mort Zuckerman, Steve Wynn and Bernie Marcus are just dummies and know nothing about business. Of course, lifelong politicians and professors know better. They do not understand that they are not the smart ones, we are. They were only elected because of darn good money raising and p.r. machines. But hey, we voted them in. I have written many times that if they didn’t stop, eventually the markets would stop them. I guess a crushed dollar and now a cascading market has not done the trick. I guess an economy that is back to standstill has not done it. I guess a rating’s downgrade has not done it. Just pile on more debt. Everything will be just fine.

 

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.

BEARISH ACTION! (Revisited)

I thought it appropriate to send out what I wrote to you over this past weekend. I put in bold what I think you are starting to see right now. Remember, all I am doing is providing you characteristics of bear markets. This one continues to act in a classic fashion. Eventually, you will see more and more recognition that this was and is not a garden variety correction. The report from this past week.

                                       BEARISH ACTION!

Originally posted by Gary Kaltbaum on September 5, 2011

In my past couple of missives, I told you markets were rallying right back into resistance. This is the “normal” action I told you about that occurs in bear markets. To review…when markets gets extended and stretched from the norm, eventually they move back towards the norm before resuming the major trend. In this case, the trend remains down. But that’s the trees. The trees was the anticipated bounce as well as the stalling at resistance. The forest is simple…this remains a very bearish market, not only here but across the globe. Let’s pick it apart.

It is bearish that after a nauseating drop, many are still calling this a normal correction. I am stunned by some of the “don’t worry, everything will be ok” commentary considering we just came off of the 2008 bear market. Amazingly, the past three covers of Barrons indicated nothing but bullishness. For the most part, strategists have not budged with their end of year targets..

It is bearish that I have only one group in a bull market…and that group is GOLD. This is not good news.

It is bearish that FINANCIALS continue to lead down. This was one of the most important clues in me telling you way back in May that the market would be on borrowed time. On many occasions, I stated the financials were acting just like they did in 07-08.

Speaking of financials. Do not ignore Bank of America. I continue to wonder just what is going on as the stock was being pummeled before Warren Buffett stepped in. I continue to worry that they had to raise $13 billion when they said they didn’t need to. This bears watching as financials have sold off since that news.

It is bearish that world markets are still imploding. As I have told you, bear markets are directly correlated with the action in world markets. I cannot help but worry about the action in the German Dax as well as others. China, Brazil and a few other countries topped way in advance of ours.

It is bearish that about 1 out of every 10 stocks is in good technical shape…and frankly, I think I am being nice.

It is bearish that the recent rally was exactly what a bear market rally looks like. I coined the phrase that bear market rallies are sharp, quick, make you feel good, get everyone talking about it, suck you in and bury you soon after.

It is bearish that most major indices did not even get close to the declining 50 day moving average. The only index to make it was the Nasdaq 100. Please notice that it hit the 50 day to the penny and failed. You may also want to look at the Nasdaq which failed right at the 2600 level…the place I told you was the major breakdown for this important index.

It is bearish that cash in mutual fund’s coffers is still below 4%…a very low level indicating a lack of ammo but more importantly…this will mean they will have to sell if redemptions start to pick up. And just to give you an important lesson, it is these redemptions that lead to more selling…which leads into deeper bear markets.

It is bearish that we haven’t even begun to see what I call “the coughing up stage!” This is the stage where everyone finally recognizes this is not a correction but something much worse. At that point in time, selling really begins to pick up.

Lastly, and as I have told you, my big worry is that the beginning of this big drop reminded me of big bear markets and not something more garden variety. Of course, we will only know this in time.

There are other things I can go over but I gather I have already ruined your day. The question is whether there is any light at the end of the tunnel. This second…not much. If recent lows can hold for a while and start stair-stepping up, that would be a start…but can’t go there just yet. Here are those levels that will need to hold:

About Dow 11,000 which would be the bottom of the trendline off the recent bearish wedge. And then of course the lows would come into play at 10,604.

About S&P 1150 and then 1101.

A break of these levels…especially the lower number…and good night. This would mean the NDX and the NASDAQ would be breaking their lows also.

This is classic bear action. There is no way around it. The topping out process was classic, the drop was classic, the reaction to the drop was classic, the rally into resistance was classic and now the resumption of selling is classic. And the most important point which was classic is how the market telegraphed the major economic slowdown before the numbers came out. Only now are people worried about another recession. This report warned you months ago about what was to come.

Bear markets are painful and in the case of the past 2 bear markets, brutally painful. I have not seen to this date one characteristic of a potential bottom show up. Just like tops and bear markets have their characteristics, bottoms and bull markets have their own. For sure, we are going to continue to see some wild action both up and down. For sure, we are going to have a lot of news-driven events like another massive spending bill and a QE3. I am not so sure the markets already know this and could care less.

 

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.

34 MINUTES OF TAX AND SPEND!

Take away the big venue. Take away the politicians. Take away the soaring rhetoric and what do you have?

I think it is simple…a 34 minute speech about more taxing and more spending cloaked into a lot of blah blah blah. With all due respect, this was another $450 billion of nonsense. There was not one…I repeat…there was not one word about putting certainty in the minds of consumers and businesses. The only certainty again was that government is going to spend more taxpayer dollars. Again, this man thinks it is governments money to dole out. I have news for him…it is our money being doled out to the government…only you decided to bring this country to the point where the next 8 years of taxpayer dollars are already spent.

I have told you since day one of this administration to pay no attention to what he says and watch what he does. This administration was easy to figure out when we all heard “I will not treat taxpayer dollars as monopoly money” or my favorite “I will go line by line!” When I hear anything coming out of this administration’s mouth, I think of one phrase…”yeah…that’s the ticket!

So…a few thoughts:

Government creates no long term jobs. Ok…I take it back. They create long term jobs in inefficient government bureaucracies.

When government borrows to pay for something, it does not stimulate because those dollars have to be paid back. It is just more debt.

There will be no businesses hiring an extra worker just because they get a $4,000 giveaway from taxpayers.

A payroll tax cut does not change behavior. It is just government again saying…here is a little gift for you. It only works combined with permanent tax cuts.

Wasn’t our debt just downgraded? This “program” will just add more. Raise your hand if you believe it will be paid for.

There was absolutely nothing mentioned about putting certainty into a business owner’s mind. Short term thingamabobs are meaningless.

I will have a point by point dissection of the speech over the weekend. I will send it out as well as post at garyk.com.

 

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.

CONTINUED WICKED ACTION

Gaps and reversals…reversals and gaps. Rumors about this and that! How does one play this market? Lightly! But after all the noise, I just continue to look for any changes. For someone who has been overall bearish for quite a while, I am always looking for light at the end of the tunnel. Here is some potential light.

GOLD may be putting in a classic double top. This simply is a pattern that occurs many times to stop a move dead in its tracks for the time being. Gold has been the place to buy when the market has been hit…so maybe just maybe.

The market, kinda sorta, has now visited the lows three times and seems to have held for the third time off of yesterday’s vicious reversal. It is always important to recognize where a market decides to stop going down, at least in the near term, in a bear phase.

My short list of growth leaders continue to hold up. I must tell you that this is amazing as even in last year’s correction, most broke badly. I am talking names like Apple, Amazon, Green Mountain Coffee and a few others. If they ever break, look out.

Lastly, finally, some of my measurements of sentiment have finally turned bearish…of course, which could be bullish.

Hey…just trying to be an optimist. The big picture is still yuck…and for now, any bounce to me is from a continued stretched and extended market. Regardless, this is going to continue to be a tough market to play as one cannot be confident going home long or short just yet. There is just too many outside influences wreaking havoc right now.

 

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.