On October 4th, the markets were heading into new low ground as the call for a bear market pervaded the air. At 3:15, the market reversed and had a monstrous move into the close. This was a washout day…in where the last of the sellers give up. This action had me writing the following paragraph to you that day:

“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?”

My subsequent reports reported better action but one must remember, a ton of resistance was ahead. Fast forward to today…and to be blunt…I am absolutely amazed at how much territory the market has covered in such a short period of time. This action reminds me of 1998 during that crisis. At the time, the market made a vicious double bottom with a high volume washout day in October. The market never looked back. So far, this market has not looked back…but I do keep in mind, we are not in the long term bull any more. We are in a longer term bear.

I must admit, I thought markets could go higher but I never thought we would get this. It just goes to show you how vicious the moves are now based on high frequency traders as well as the news-driven environment.

I didn’t write last week but if I did, I would have told you markets were stretched,extended and overbought to the upside…and that the market needed to rest. Well…the market got a whopping few days rest before major indices moved above another level. This leads me to tell you one important point right now…markets are now getting into the meat of massive resistance. Frankly, for me, I would like to see the market sit for a bit…and not just for a few days. Sitting lets stocks, sectors and the market form better patterns to move up from. V-shaped moves are just too hard to commit to.

A few notes:

GOLD has held the 150 day moving average for the 8th time since January of 09. This is amazing symmetry. It held to the penny on 10/20.

In the midst of this rally, a lot of stuff off the bottom have participated. Even the financial and housing stocks have broken above first resistance.

Foreign markets have participated but I must warn most continue to underperform our market. One of the characteristics of new bull markets is foreign markets leading the way.

SEMICONDUTORS continue to lead. If there is one chart to watch to tell you where the market is going, it is the SOX. It held the 50 day on the first pullback…which is good news…which led the rest of the market to follow.

Major indices are now all above the 50 day moving average. You know my thoughts on this. Above is good…below is bad. The whole market held there on this latest pullback.

I am still agnostic on where this is going. Some are already calling for a new bull just weeks after many started calling it a bear. I do not need to label it.

Lastly, the #1 question I get is on how this can be happening. After all, the numbers do not look good. After all, deficits around the globe are massive. There continues to be one answer. What do March 09, August 2010 and October 2011 have in common? They were all bottoms in the market (we shall see where this one goes) and more importantly, all had announcements of “printing of money!” We had QE1 around March 09, QE2 announced Aug 10 and by no coincidence, go check the news on October 4th, the day the market recently bottomed. Europe announced a form of not only QE but also a TARP. Subsequently, we are now hearing about a $1.3 trillion…that’s trillion…save! This is on top of other measures being considered. On top of that, the Fed announced last week that they were prepared for another QE. So leave no doubt, there is a method to the madness…but as I have told you, creating more debt and leverage to cure a problem created by debt and leverage…will not be the long term answer. I am not sure I want to be around when the bill comes due. But markets are up and everyone is happy again. Yippee!


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.