AND THIS MAN GETS TO VOTE ON LEGISLATION FOR THE FUTURE OF THIS COUNTRY

I guess the 100 million Americans that make $39,999 or less will now just quit their jobs.

Rep. Jesse Jackson Calls On Government To Hire All Unemployed Americans For $40,000 Each | Fox News

MUCH BETTER….BUT!

On October 4th, the day the market put in its lows, I told you “Getting past that, I am considering today something akin to a near-term washout as the lows were undercut and then got back above. This serves to get rid of many late sellers.” I then went on to say that I thought “A” low was being put in.

Very simply, we have again seen another outlier move…this time to the upside. The constant 10% swings since the beginning of August have been nothing short of amazing. I would have never bet on another straight up move…but it is what it is.

Based on this recent move up, I do not think there is any chance of pullbacks taking the market back down to the lows. Frankly, I do not even think pullbacks will take us down more than a few percent. I say this because I am seeing enough areas and enough stocks “turn the corner” meaning their patterns have turned up. On top of this, the SEMIS are leading and leading in a big way. Even names that have warned and guided down are rallying up. Go look at FCS today. When bad news is bought up, it is good news. The SEMIS are crucial to the market To add to this, it is October. October has a good reputation of taking bad markets and putting in lows. This is because the big boys see the end of the year coming where everyone gets paid based on how good they have done. Yes…this is a factor. Lastly, all major indices are back above the 50 day moving average. Of course, any pullback needs to see that important area hold.

So…I guess that is the good news. But just a few words of caution.

We are still dealing with a ridiculously news-driven environment. I do not need to tell you about whom or what.

We are still dealing with massive overhead resistance on further moves to the upside…and short term, I do not need to tell you the market is due for a rest or pullback.

We are still dealing with many areas that remain in very poor shape.

We are still with a NO new highs market. In other words, there is still a clear lack of leadership but leadership could show up in time if the market continues to do better.

So while I believe we could get more upside moving forward, I must caution you about how much more upside. It is just good to see things may be getting better…and if right, not having to deal with more nauseating drops.

Of course, nothing is for sure in this crazy environment. So if distribution decides to rear its ugly head once again, I will let you know. We now head into earning’s season. On that note, it is probably good news that guidance has been taken down in a big way in recent weeks so companies’ ability to beat the number is made easier.

P.S. Be sure to register now now for my live Webinar on October 29, 2011. Don’t wait, there’s an early bird discount if you sign up now. Plus, click here to submit questions that I’ll be answering during the webinar. 

 

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.

ANOTHER GOOD LOW?

This past Tuesday, while major indices were breaking down out of a very bearish pattern, I wrote to you that I thought we were in for an imminent bounce. I thought that bearish sentiment was hitting a peak while many were finally calling for a bear market. You also need to know that at recent lows, the S&P was down 21% while the small and mid-caps were closer to 30%. Most often, markets experience washouts when sentiment flies off the charts. Technically, all the late sellers take markets below support intraday, only to see them finish up sharply. This is exactly what happened last Tuesday…leading to two more strong days. Friday was looking like another strong day until the market sold off sharply into the close. So now what?

You should know by now that this is one of the most news-driven environments I have seen in a long time. How many times do we have to deal with another save of Europe? Last week, we were entertained with a European QE, a downgrade of several countries and another save for Greece. How does one deal with this noise? Lightly! For me, I cannot go home feeling good about being long or short. I have no clue if the market will gap up or down the next morning. All I can do is pay attention to the fear and greed patterns that have worked so well for me in the past because I believe that markets will ultimately go where they want to go regardless of the news.

Major indices are now teasing the 50 day moving average again…but be careful. You must remember that the 50 day line is much lower than it was several weeks ago…and many times in bear markets, the 50 day gets taken out for a couple of weeks before rolling over again.

A few other notes:

There continues to be very little in the way of leadership. In fact, I cannot get past one hand in counting new highs.

The growth leaders that I told you were topping out, continue to act horrid. This goes a long way in telling me about markets. Many like Priceline, Bidu and Apple are now trading wide and loose. I will need to see them tighten up before feeling the least bit better.

Financials? Nothing happening yet…just bounces with little or no strength.

The one area that I am finding some better relative strength is the Semis…which bears watching. Quite a few names have broken their downtrend lines or 50 day moving average. You all know the importance I put on the semis. I would also add that some areas that were hit the hardest like industrials and commodities “feel” sold out. So maybe something to build on.

Overall, I continue to believe we are in a “pain in the rear” market. Markets can go higher from here…but I also believe not much higher. I also believe the lows we saw last week will hold for now as high volume reversals to the upside usually stick. We may just enter another few weeks of nauseating trading ranges akin to what we have seen for the past 9 weeks. Thrilled?

In any case, a few thousand earning’s reports come out starting next week. A lot of those reactions should dictate the 4th quarter…which has a good record of being positive. Time will tell.

 P.S. Be sure to register now now for my live Webinar on October 29, 2011. Don’t wait, there’s an early bird discount if you sign up now. Plus, click here to submit questions that I’ll be answering during the webinar. 

 

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.

I TOLD YOU…I TOLD YOU…I TOLD YOU…SPEND IT FIRST…COME AFTER YOU NEXT!” REID PROPOSING 5% SURTAX!

WHO IS CONTROLLING THIS %#@$%#%?

Earlier today, I wrote to you that I thought the market was due for a bounce. After all, everything was so stretched to the downside, the talk of a bear market filled the air while many were heading for the doors. At 315 pm, the market was being trashed again. I was asking myself…”Gary, why do you need to talk short term c–p?” At that point, the DOW was down another 200, Apple was being smoked and another bad day was at hand. As I write this after the close, in 45 minutes, the Dow went up 378 points and the Nasdaq went up 104 points.

The news; a supposed bad bank is being created for the problems in Europe. Yikes! I am just letting you know that these moves are sickening me…and I am one who has been on the right side of things. I don’t know who is controlling things, who is pushing the buttons or what computers are doing what. I just know this is not good for the long-term confidence in the markets.

Getting past that, I am considering today something akin to a near-term washout as the lows were undercut and then got back above. This serves to get rid of many late sellers. I gather questions will again be asked on whether this is the low. I will simply say it is A low…but don’t blink. This is going to remain a ridiculously over-the-top proposition to play as another ugly day turned into a very good day in less than 45 minutes. Bets on tomorrow?

 

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.

HEY DURBIN…YOU HAVE DONE ENOUGH DAMAGE WITH YOUR INSANE POLICIES. DO YOU NOW WANT A RUN ON A HUGE BANK?

 

 

HUGE INFLECTION POINT IN GOLD

I am a big believer in symmetry in the market. Many times, a stock, sector or a market will bounce off specific moving averages in a bull market for a very long time. The same goes for a bounce into moving averages in a bear market. The longer something holds a specific area…and then breaks, the bigger the implications as markets recognize something has changed. I am now watching the price of Gold closely as there is the potential for a major change in its complexion.

Very simply, one has to go all the way back to January 20,2009 to see that since that date Gold has held its 150 day moving average all the way up. Every time it pulled back into it, it would hold and head back to the upside…for another leg up in its bull market. This is important because it has hit this level so many times. It hit it in April 09, July 09, August 09, February of 10, March of 10, July of 10, January of 11 and again, just recently, on September 26,2011. On that day, Gold pulled into the 150 day average almost to the penny before bouncing.

The big problem is that Gold experienced climactic action that usually signals an important top of consequence…and the problem is that Gold seems to be wedging off this latest bounce. A quick glance will note that the 150 day moving average for the GLD is sitting at about $154. A break below and Gold will head into its first real bear market in quite a while.

I still think Gold is in a major, longer term bull market that started many years ago…and still believe the move ends in a monstrous climactic run akin to what happened in the 70s/early 80s. I just think it is due for some pain…and it may be closer at hand. If it holds, it holds. Just wanted to keep you in front of what I am seeing.

 

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.

SHORT-TERM…MARKETS DEEPLY OVERSOLD

Since I told you markets were starting another leg down, major indices have dropped a whopping 8-10%…and that’s just in days. So…to be clear…markets are again stretched, extended and oversold to the downside. This doesn’t mean a good bounce is coming and this just keeps heading lower…just that the conditions are now set for a bounce to come. Add in that finally, many are calling this a bear market…and maybe, possibly, in the short term, markets could bounce some. Keep in mind, this does not change the big picture…at all! It just means many names and many areas have had mini-crashes in the past few days…and it would be quite normal to bounce somewhere in here.

Lastly, I do want to make note that indeed, the selling did affect all the growth leaders as they have been crushed in the past few days as the big money crowd sells everything that has held up.

 

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.

A COMPLETE RUNDOWN OF THE PAST FIVE MONTHS

If you have been reading my reports, listening to my radio show or watching me on Fox News and Fox Business, you would know that in the April/ May period, I started to turn bearish on the market. This did not come out of thin air. My stance on the markets comes from exhaustive studies of the markets. It is in these studies of the characteristics of both bull and bear, that I believe, keeps me in lockstep or one step ahead. It is not perfect, but it is darn good. You see, the fear and greed seen today is the same as it was 50 years ago, except that things are much faster. But the same characteristics of tops and bottoms today pretty much look just like it did back then. Thus, my thesis is that the past 5 or so months was nothing more than a classic topping out process after a 2 year bull market, which has now turned into a classic bear market…and this report, has been in front of it all the way down. In fact, just about everything that occurs in a topping process showed up making this bear somewhat easy to read.

So save the following. Why? Because after the next bull market is over, you will want to be able to recognize these same topping characteristics when they show up again.

LONGEVITY

For starters, I told you way back in the April/May period that this might not be a correction like last year. Why? Because the first thing you need to know is that bull markets have a shelf life. They do not last forever. When markets went into corrective mode in 2010, the bull was only a little over 1 year in duration. Bull markets usually last between two and two and a half years….thus this year’s top had to be watched more closely as 26 months is just about right to end a bull.

SENTIMENT

I follow sentiment all the time but it only matters to me when it goes to extremes. Overly bullish sentiment was lining up just like it always does near tops. These contrary indicators work well at extremes…and as I reported to you early in the year, a laundry list of bullish sentiment showed up.

I reported to you outlandish bullish calls. These calls never happen at the bottom…but nearer to tops. Without mentioning names, two popular market pundits called for a 2600 S & P and 20,000 Dow respectively in less than 18 months. We are talking 50-100% predictions in 18 months. Please recall the books “DOW 36,000” and “THE ROARING 2000s” that came out at the worst time.

I reported to you a slew of stock splits. No trick here. Very simply, companies split their stocks after big moves. When many companies do the same, there has been a direct correlation that it is getting late in the game. Just another characteristic that shows up nearer to tops. I reported to you that a good number of secondaries and ipos were coming to the market. Firstly, this just adds supply to the market but most importantly, this is another characteristic that shows up nearer to tops as companies and investment banks take advantage of market conditions after a run in the market. They cannot get this done during bear markets.

I reported to you that cash in the coffers of the big boys was at multi-years low…in other words, running out of ammo. Mutual fund cash dropped to 3.8%, a multi-year low.

Ipos were becoming less and less stellar and more and more overpriced. This always occurs nearer to tops as greedy investments banks try to take advantage of market conditions. The only victim is the public as you can now scan the performance of some of this year’s ipos. Not a pretty sight.

Lastly, under the category of sentiment are the insiders as insiders of corporate America were selling stock in numbers I had not seen in ages.

Foreign Markets Topped First.

As I told you many months ago, it was a warning shot that Asian markets, emerging markets and many European markets topped out in advance of ours. This has always had a direct correlation with the start of bear markets. This was a real eye opener for me. It was a real negative when I saw the German Dax and the London FTSE roll over as they have a great record of leading the U.S.

FINANCIALS START ACTING LIKE 07-08 ALL OVER AGAIN

I reported to you that the financials were starting to act like it was 07-08 all over again. Markets go up…financials sit. Markets go down…financials lead down. Since I started writing about this, names like BAC are down over 50%. I am not saying anyone is going out of business like they did in 08. I am saying some are acting like it.

MARKETS START TO DETERIORATE

As sentiment was lining up…as financials started to act poorly…deteriorating market internals started to show up. I reported to you that semiconductors looked to have topped. This was way before major averages topped. This was on heck of a 1-2 punch as I have always put a ton of weight on the action of financials and semiconductors as a harbinger of things to come. In other words, two important areas that lead both up and down…were now heading down.

NEW HIGH DIVERGENCES

I reported to you that every time, major indices rallied back to new highs, fewer and fewer stocks were moving into new highs…meaning the market was being led by fewer and fewer names…another warning shot! More on this in a bit.

COMMODITIES TOP

This led into the trifecta of woe as I reported to you that the whole commodity complex looked to have topped. Oils, Metals/Mining, Aluminum, Copper…you name it…started to get hit and hit hard.

So…we now had overly bullish sentiment, foreign markets topped out, financials, semiconductors, and commodities topped out…but most major averages were holding up. Why? Simple! As I reported to you, money was flowing out of “risk” areas and parking itself into the most liquid, lowest beta megacaps that have a major influence on the market. So while “underneath” the surface, things were heading south, major indices were masking the damage…another classic sign of an impending bear. All that was needed was moving averages to break for the major indices.

AS MOVING AVERAGES START TO GET TAKEN OUT

As I reported to you, nothing bad happens to the major indices until and unless they break below the 50 day moving average…and more importantly, the 200 day moving average. Throughout market history, these 2 areas are the place where the big money crowd stand up and defend the downside vigorously. Breaking the 50 day is not the death knell. The 200 day is. But first, the 50 day. On June 20, the 50 day was breached for most major indices. I reported this to you, but for me, unless you break the 200 day, you are just in corrective mode. So upon the first break, major indices ran right down to the 200 day. I wrote to you that if the market was going to hold, this would be the place. The good news was that in mid-June, the all-important 200 day held…leading to a rally. But as I reported to you, the rally was less than meets the eye as fewer and fewer stocks were participating in any upside…another sign of trouble ahead.

The market rally lasted a whopping 8 trading days before distribution showed up. On August 1, the 50 day was again taken out…and the 200 day tested again. I then wrote to you that if the 200 day was taken out, expect some serious selling as the big boys would recognize the market was finally giving up. You don’t need me to tell you what happened next as the market went into waterfall mode. It was one of the most vicious, quick and ugly drops I have seen in a long time. What led the way down? Correctomundo…the financials! The combination of too much bullishness, not enough cash in the coffers and the technical break was too much.

It was at this point that I reported to you that markets were about as stretched and extended away from the norm as they come. Knowing the markets eventually return to the norm, I pointed out to you to expect whippy rallies and drops until prices met the declining moving averages again. For a good 7 weeks, markets were as about as volatile as they come. We all watched in amazement as the Dow moved 500-600 points in a matter of hours. Combined with gaps and reversals on a daily basis, the market became all but unplayable. I took a step back and just made a series of short-term calls, some good…some not so good…as trying to call the short term in an environment like we saw is almost impossible.

DEFENSIVE ISSUES START LEADING

I reported to you during those 7 or so weeks, several growth leaders continued to buck the trend but one had to be careful as most of the market looked horrid, but also the areas that were leading were all defensive…which is not a good thing (dollar discount stores, auto parts retail, utilities, food, drugs, beverages, tobacco). It has never been good for the market when recession-resistant, defensive areas lead the market. This led to the past couple of weeks where I had to note that after such a horrible drop, strategists stayed bullish, Barons was running a series of bullish covers and an air of “the worst is over” pervaded the air.

BEARISH WEDGE BUILDING

I wish I had a dime for every time I mentioned the term “bearish wedge!” This is a pattern that was building in the market for over 7 weeks. In classic bearish fashion, the S & P hit the 50 day average and sold off hard…leading me to tell you on 9/20 that the next leg down started. You know what has happened since.

THE COUGHING UP STAGE AND SELLING “ALL THE PRETTY LADIES!”

I also noted that we had yet to see a “coughing up” stage, which always happens in a bear market. This occurs when more and more realize this is not a garden-variety correction. This leads the people who haven’t already sold…to sell…leading to mutual fund redemptions…leading to more selling…leading to the vicious cycle getting into full swing. That led me to write to you “Good Bye Growth Leaders!… that the leading growth names that held up so well…would start to come in. Since, leading growth names have been crushed. Just check out the charts of names mentioned like Bidu and Priceline. Even the almighty Apple has finally started to break.

What Now?

I must tell you that bear markets usually have three legs down. Some are saying we have just started the 2nd leg…some say the 3rd. In any case, the market has not only traced out a bearish wedge but looks to have traced out a bear flag. Any break below recent lows will complete this ugliest of all patterns and lead to lower prices. Unfortunately, I think odds favor this occurs…meaning bye-bye to recent lows.

I think all the %$#@&*$ who run this country, are out of all ammo they never had in the first place.

There is nothing I liked about last week’s action…especially with the market now going after everything. I would just point out that this is going to remain a very tough environment for the bulls as they will become more disappointed as anything holding up gets taken down. Keep in mind, during bear markets; it is quite normal to have rallies lasting many weeks. We just had one 7 weeks in duration…so be on your guard. For me, there is not much to do except let this play out. I will never know how long a bear lasts or how far it goes. I just wait for the signs of a bottom before I get back into the market in a meaningful way. I do have to remind you another one of my big worries has been that the initial vicious drop off the top reminds me of bad bear markets and not something garden variety…so this bears watching. Only time will tell.

My continued worry is in the continued horrid action in financials, but I must add the action in the price of “stuff”, like Copper, Oil and others, scares the heck out of me. Their prices are talking and they are saying demand is heading south. This will indeed have a direct correlation with markets, as price is the great forecaster of things to come.

I can count on my hands the number of stocks in good shape and those stocks continue to be defensive. I have not been able to find much in the way of positive, except, sentiment has turned bearish but after the recent drop. Strategists are finally lowering their targets for the market as well as the economy. This is quite normal at this juncture and after a big drop. Just keep in mind, this is not a pinpoint indicator. Sentiment is a secondary indicator. I would continue to play defense, as the overall picture remains gross. Not withstanding bounces, this is no time to be aggressive as many are being run over.

Gold and Silver

I start with silver because it topped out many, many months ago. I reported to you that silver experienced a classic climactic run which always ends a bull move. These patterns always look like an Eiffel tower. as they go straight up and straight down as the maniacal crowd goes into a buying panic AFTER a big run. Silver never recovered and is now breaking down badly! You may look at other climactic runs in names like JVA which occurred in early July and LVS which occurred last November.

Gold has now displayed the same climactic action as Silver only Gold revisited the highs one more time. I believe based on this action, Gold is now toast for possibly the intermediate term…joining Silver. Both had become over-owned and over-loved and were due to correct…especially Gold.

I hope this little missive goes into one of your files as a must read of the characteristics of bear markets that have shown up time and time again. This way, from your own study, you will be ready next time. I will soon be announcing a webcast showing you all of this and will have a complete write up on the characteristics of bottoms.

 

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.