The Sigh Of Relief!

“THE SIGH OF RELIEF”

By Gary Kaltbaum
@GaryKaltbaum
garyk.com
Fox News Business Contributor

(From yesterday 3:10 pm)

“Notwithstanding another end-of day meltdown (it had better not), we would suggest that the most stretched, extended and oversold condition we have seen since 1987 is now going to start to work off the most stretched, extended and oversold condition we have seen since 1987. It does this with price and time. The all-important 50 day moving average is a whopping 1500 DOW points above current price. Eventually the two will meet with price bouncing higher as the moving average price comes lower. Typically they will meet about half way. We do not know the timing or what form this comes. It can take a few weeks or in the case of this market, a few days. Only a very, very, very strong rally will enable that (QE4?). Of course, it is also end-of-month action.

China is already pulling out more stops to stanch the bleeding. Europe is talking about more QE. Who knows what’s next? Just realize massive damage has been done, this after the internals were already terrible. But again, this move was way out of the norm where eventually, a little bit of the norm will be found.

We will have a much better idea in a couple of days on how good the bounce is, how far it goes and what type of conviction is behind it. Just know that as of this writing, we have found a whopping 3 new yearly highs in all of the market.”

Fast forward to this morning:

First off, we forgot to mention an important Fedhead “fed” (no pun intended) the markets yesterday by saying raising rates is no longer “compelling!” Duh! We had no idea that would happen.

So…the market finished strong. We have a nice gap to the upside. Everyone is feeling better. Careful! Look what happened overnight!

“Less than an hour before the close today the Shanghai Composite Index turned negative, dropping almost 1 percent before going on an astonishing rally in the last 45 minutes of trading to finish the session 5.3 percent higher. According to people familiar with the matter, the late-day rally was sparked by Chinese government intervention, which aimed to stabilize the equity market ahead of a military parade on September 3. “

Really! Do we really think it positive that Shanghai ended up strongly because of the government buying up the market? We gather you get the point.

As we stated yesterday, we believe there is more time and price to work off some of the drop. We are not as sure as some pundits who are already calling the bottom that after one day up, you can call THE bottom.

Venezuela Is Adding More Zeroes to Its Currency to Deal With Hyperinflation

http://www.bloomberg.com/news/articles/2015-08-26/venezuela-said-to-ready-larger-bank-notes-as-inflation-soars

The Nonsense Continues… Market turmoil makes September rate hike ‘less compelling’: Fed’s Dudley

http://www.reuters.com/article/2015/08/26/us-usa-fed-dudley-idUSKCN0QV1ND20150826

How the Fed Usually Reacts to Declines in the Stock Market

http://www.bloomberg.com/news/articles/2015-08-26/goldman-looked-back-at-how-the-fed-usually-reacts-to-declines-in-the-stock-market

Required Reading Of The Day

Street Regains Momentum, Surges to Session Highs

Dudley: Sept Rate Hike ‘Less Compelling’

Schlumberger to Buy Cameron for $14.8B

Saudi Arabia Squeezed by Oil Swoon

Copper Drops as China-Led Demand Concerns Persist

Kaltbaum short note on the markets!

August 26,2015 3:10 pm

They teased another nauseating reversal early on but:

Notwithstanding another end-of day meltdown (it had better not), we would suggest that the most stretched, extended and oversold condition we have seen since 1987 is now going to start to work off the most stretched, extended and oversold condition we have seen since 1987. It does this with price and time. The all-important 50 day moving average is a whopping 1500 DOW points above current price. Eventually the two will meet with price bouncing higher as the moving average price comes lower. Typically they will meet about half way. We do not know the timing or what form this comes. It can take a few weeks or in the case of this market, a few days. Only a very, very, very strong rally will enable that (QE4?). Of course, it is also end-of-month action.

China is already pulling out more stops to stanch the bleeding. Europe is talking about more QE. Who knows what’s next? Just realize massive damage has been done, this after the internals were already terrible. But again, this move was way out of the norm where eventually, a little bit of the norm will be found.

We will have a much better idea in a couple of days on how good the bounce is, how far it goes and what type of conviction is behind it. Just know that as of this writing, we have found a whopping 3 new yearly highs in all of the market.

And the Mets remain 5.5 games in first place and are quite fun to watch!