THE MARKET THAT WANTS TO PISS EVERYONE OFF!

August 26,2015

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

After yesterday’s sickening late day drop, we wake up this morning to see the market jacking back up again, pissing everyone off. Everyone who bought yesterday morning were sick by the close. Anybody selling at the close are sick this morning. WE HAVE ABSOLUTELY NO IDEA HOW A MARKET IS GOING TO OPEN ON A DAILY BASIS. The fact is we are going to get a ton of crap from central banks overnight right now. Last night, China tried to pull more strings and markets reacted. Europe is now talking about more money printing. Will the market hold today’s gap? Don’t know. Will the market sell off again? Don’t know…and we have been on top of this swoon. One of these opening gaps to the upside will hold.

Our main thought process this second is the simple fact is that this market is the most stretched and extended to the downside we have seen since 1987. One can argue we saw the same in 2000. After a 16-18% nauseating drop, after 3000 Dow points, on a short-term basis, the market is way overdue to bounce and hopefully hold. Yesterday was the opposite. To put it into perspective, the Dow’s declining 50 day average is at 17,618 with the Dow closing at 15,666. Eventually, price and moving average will meet. Normally it is by moving averages continuing to drop while price bounces into it. We are now also seeing a lot of bearishness pick up as well as a ton of worry. This is actually good news.

Just remember, there is only one goal of Wall Street, governments and central banks…and that is higher asset prices. We gather there is a concerted effort being planned to get markets back on the right foot.
They will stop at nothing. Just know they have already printed $15-20 trillion while keeping rates at 0% forever.

We have absolutely no clue how today finishes but as always, will closely monitor it. Because of yesterday, they’ll be plenty of people expecting another sell-off. Just keep your wits about you and hopefully a 16-18% drop is it. One last potential bit of good news is that quite often, after a big drop, a turn is made when there is massive volatility back and forth. We think the past couple of days defines that.

Notable quoteables from Gary Kaltbaum!

Notable quoteables from Gary Kaltbaum from the past couple of days!
Falling asset prices are either telegraphing a recession or will cause the recession.

Asset bubbles live off of margin and leverage. The popping of the bubbles and subsequent drops are caused by that same margin and leverage.

Tuesday’s late selling was not aunt Mary and uncle Bob. It reminded of forced selling as mutual funds have very little cash on hand. There is only one thing you can do when you have very little cash on hand and get redemptions, SELL! That was the big money crowd selling. It is never a good sign when the Dow is up 400 and finishes down 200 and all the selling comes into the close. Of course, they will try to gap it up tomorrow.

For the umpteenth time, this bear phase started in the summer of 2014 when the whole commodity complex topped out. Since, it was a slow moving topping process as one by one, the dominos tipped over. It all started to become more evident when the average stock topped, the average sector topped, when the transports topped in March, when the semiconductors topped in May and when the market was held up by a narrower and narrower list of mega cap stuff. All that was left was for the indices to join in. That happened when the S & P took out 2040 (you were warned) and then all hell broke loose.

So far, the reaction by the crowd has been classic. Don’t worry. Everything is ok. It will come back. It is just China. Blah blah blah. They do the same thing every time the markets drop.

Monday’s open was a flash crash. Hundreds of stocks opened down $20-30 and were back up in a minute or so. Some back up in seconds. There should be an investigation.

At least this could shut up the income inequality yappers as the big money is being carved up.
We have been stating for ages they will never raise rates until the market makes them. Regardless of what you hear, there is zero chance they raise rates now…or at least at this juncture, they had better not. After 10 years of not raising rates, why would they raise rates in the middle of a financial whacking?

You will now hear rumblings of QE4 from many on Wall Street because Wall Street’s saving grace, for years, has been the printing of money from the maniacal central banks. What happens if the markets stop listening to even that? That’s what is going on in China right now. Regardless of anything they do, markets cannot get any traction.

Major indices had better hold the 16-18% drop off the highs. You don’t want to hear everyone calling “bear market” if they drop more than 20%. Is there a chance markets can stop going down? Of course. Remember, the only goal of central banks is to have asset prices go higher. We can guarantee there have been a lot of conference calls between the bubble makers to stanch this bleeding. They will do everything possible. Hey…they have already printed $15-20 trillion. There is nothing off the table that they would not do.

Markets are still the most stretched and extended to the downside they have been since 1987. A vicious and sustainable bounce can happen at any time. After all, the troops are mobilizing with their fake opinions saying everything will be ok. (Think Kevin bacon in animal house!) But it is noteworthy that 3000 Dow points has not yet done the trick. It is noteworthy that Monday’s intraday bounce and Tuesday’s gap to the upside petered out so quickly. It tells you just how weak the market is and simply tells you big money is still selling. Just realize it would be normal for markets to rally up a decent amount here as price always tends to go back towards moving averages.

Kaltbaum morning notes!

From last night:
“Need not elongate this nonsense so tonight, a short report!

After 2200 Dow points to the downside in 4 days and 3000 points from the highs, the Dow and the market finally found A low. We do not have to say too much about the outlier open nor the wild intraday swings as we have no clue what happened. But we do know major indices were about as extended to the downside as we have ever seen (except for 1987) and due to bounce from somewhere. Somewhere started today. With the Dow still 1800 points below the declining 50 day moving average, it would be quite normal to get further upside…and in this environment, some vicious upside.

We are hardly paying any attention to opinion or the whys. Price action is good enough for us. Don’t blink!

Mets up by 5 and now hitting the ball well!”

From this morning:

Futures are up humongous…almost the exact opposite of yesterday. China lowers rates again. The U.S. no longer raising rates. Europe says it stands ready. A few more thoughts:

Yesterday’s open was a sham open. As we scanned, we saw bad prints all over the place. Stocks that were down $30 in 30 seconds were back up that same $30 in seconds. We heard of people being stopped out at the lows. There should be an investigation.

The tape is a mess. The charts are a mess. They look like a 3 year old was scribbling with a crayon. 3000 points down and with this open, 1000 points up. Quite unprecedented! Take your time and keep your wits about you. Typically, the volatility will slow a bit here to where we can hopefully get a semblance of order. We wish we had the secret elixir to play the past couple of days…but there isn’t any. We are just happy we were in front of this recent drop and side-stepped it. We simply hope a 16% Dow drop and an 18% Nasdaq drop is it. Need more cards coming out of the deck!

Now You Know Why They Invented Tequila!

Need not elongate this nonsense so tonight, a short report!
After 2200 Dow points to the downside in 4 days and 3000 points from the highs, the Dow and the market finally found A low. We do not have to say too much about the outlier open nor the wild intraday swings as we have no clue what happened. But we do know major indices were about as extended to the downside as we have ever seen (except for 1987) and due to bounce from somewhere. Somewhere started today. With the Dow still 1800 points below the declining 50 day moving average, it would be quite normal to get further upside…and in this environment, some vicious upside.
We are hardly paying any attention to opinion or the whys. Price action is good enough for us. Don’t blink!
Mets up by 5 and now hitting the ball well!

Midday Notes!

Have you ever been so happy for the Dow to be down over 400 and Nasdaq down120 points?

At the lows this morning, the Dow was down 16% from recent highs and the Nasdaq almost 18%. On top of that, in just days, the Dow had dropped about 2000 points. Those percentages fulfill our 15-20% number….FOR NOW! Those numbers should take months to hit…instead, it took days. It is quite normal to have vicious bounces after such a drop.

On top of that, when we told you this morning we thought you would see hundreds of points in a matter of minutes, little did we know. Holy heck!

Lastly, a lot of the open this morning did remind us of a somewhat distorted open in where prices opened at ridiculously exaggerated levels from the norm…especially on the Nasdaq-types as market makers backed way away from any bids…just in case, to cover their arse. The Nasdaq, amazingly, is almost 300 points off
this morning’s lows. That is a year’s move. This action has left huge tails midday. Hopefully, it sticks and we hold for now but it’s early in the day. If we can finish midpoint of the day or better, we will take it as good news. If we can do better than that, we can call it A strong low. But not necessarily THE low.

Just keep in mind, these are just shorter-term thoughts to keep you abreast of the nonsense. That is the trees. The forest is the massive top and breakdown in world markets that we are experiencing at this juncture. We are in hopes this can be another ” 1998 Asian Contagion” but are not smart enough to know just yet. More to come!

It’s Never A Problem Until The Market Says So

“IT’S NEVER A PROBLEM UNTIL THE MARKET SAYS SO!”

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

Good morning!

The title of this morning’s note was the same title we used back in 08…and it fits today. All the negatives that are now bubbling to the surface are only showing up because markets are down. All the deficits, debt, leverage, market interference and all that crap did not matter because markets cooperated. That has now all changed!

Our recent worries about a “dislocation” in the markets has come to fruition. As we write this, futures are down a whopping 600 dow points. We are stunned at the gaps to the downside we are seeing. No one can ever predict such happenings but we put 1+1 and got a big fat 2. On top of our comprehensive weekend report, we have a few other thoughts.

In the last crash, rates were taken down to 0%. We are already at 0%. This means the next move is going to be another round of money printing.

The economy here is not fine. Any recent numbers quoted are about the past. This market action is either telegraphing a recession or is going to be self fulfilling and cause a recession.

This is all on Bernanke. We have whined 1000 times to you that he created the housing bubble and when the bubble popped, he used the same elixir that caused the bubble in the first place to get things going again…but this time, in a way no one could ever fathom. This led to the rest of the lemmings around the world to follow suit. At least Yellen stopped the printing…but expect the printing press to start up again.

We expect the Fed to act, if not today, any day. It will start with a leak of “no fed rate hike” and lead to some of the doves floating another round of money printing. We are not so sure the markets will listen this time. We wish there was no Fed.

Part of our thesis was the massive margin and leverage again in the system. In fact, it is at records. This is a classic sign of trouble when the market turns down…and causes the dislocations.

We have absolutely no clue how this trades or finishes today. Markets are way beyond oversold and way beyond stretched to the downside. It would be normal to get a vicious rally of several hundred points. We actually think you will see multi-hundred point moves back and forth in a matter of minutes. It will get that wild. Be careful of those who claim the bottom on any rally back up. The market will be the final arbiter.

We are very worried about President Obama’s reaction. President Obama loves the creation of a crisis in order to solidify power. (EPA and OBAMACARE anyone?) We hope he does not overplay it.

This is why they invented tequila! Stay well and keep your wits about you.

 

Topping Process Leads to Big Market Top

“TOPPING PROCESS LEADS TO BIG MARKET TOP”

By Gary Kaltbaum-August 23,2015
@GaryKaltbaum
garyk.com
“The sea was angry that day, my friends, like an old man trying to send back soup in a deli!”

George Costanza
Well, it should be more than obvious why we have been urging you to pay attention to the ever narrowing market. It should be more than obvious why narrowing markets are a worry sign. It should be more than obvious as to what we meant by the potential for a severe dislocation. It should be more than obvious why we exclaimed why it was vital for the 2040 S&P number to hold. Very simply, with over 60% of the market already in bearish shape and in their own private bear market, all it would take is the rest to top…and top they did. More on that in a moment.

We have been inundated with calls all asking the same thing: “now what?” For starters, we are already hearing a large percentage of pundits saying a few things we completely disagree with. For starters, they are saying this drop “came out of nowhere!” Readers of this report know that markets have been deteriorating for many months and that the big money found its way into the biggest and most liquid names in the market(another classic sign we were nearing the top). Week after week, we were telling you how new highs vs new lows were a horror show. Week after week, we were telling you that the average stock was going by the wayside. Week after week, we were telling you about all the foreign markets that were being killed. Week after week, we were telling you there were only a handful of groups that were still bullish.  Week after week, we were telling you all this was going on with some major indices still near highs, a glaring negative divergence. Another thing we completely disagree with  and are hearing and frankly, expected to hear…was that every drop was a buying opportunity…the market was now cheap…it was now a value…the economy is sound…and that the market was still a bull market. The final thing we are hearing is that this looks just like last October when more money printing by Europe and Japan as well as easy money policy from China saved the day. Let us be clear on this…WHILE WE ARE 100% SURE THERE WILL BE NO RATE HIKE AND WE ALSO THINK ODDS FAVOR QE4, AS OF THIS SECOND, THIS DROP DOES NOT RESEMBLE LAST OCTOBER’S DROP. For starters, typically, markets do not usually top out for many months and then turn right back up. No one can ever be 100% sure and with this Fed, anything is possible, especially the amounts they may print, but we will just let the market prove itself.

Getting back to the hard numbers, our scan of more than 2500 stocks this weekend now tell us we are down to less than a 25-75 market where now 75% of the market is now in poor shape and that’s being generous, a sharp drop this past week. If there is any one indicator we follow most it is this one as it does not hide good or bad. On top of that, there is now less than a handful of  groups that are in shape as the very important financials and biotechs topped badly. We warned you if these groups broke down, there was not much left to hold things up.

Another question we get is “are we indeed starting a bear market! and if yes, with how much certainty?” Let us repeat, when you are dealing with central banks that have printed $15-20 trillion depending on what abacus you are using, anything is possible. Leave no doubt that the money printing and the 0% interest rates forever have been the driving force behind a market that has not even had a correction of 10% in 3 years. Leave no doubt that Auntie Janet is cut from the same cloth as Uncle Ben the bubble maker. What if they announce another $5 trillion? Let us just say, absent that and maybe not absent that, we believe the 6 year bull market is over and while we expect some violent back and forth, we believe there is much more time and price to go. A major topping process that lasts many months does not usually just turn back up.

And the last question…when you have used the term “dislocation,” do you mean crash? First off, last week’s action was the definition of a dislocation. If one is asking about a 1987-like event? Probably not! But possibilities? Sure! Why? As we have told you, we now have record margin and leverage in the system. Fear is a very strong emotion and leverage and margin just enhances that fear. We think you saw some of that last week. We are sure that has not been wrung out yet.

Shorter-term, anything is possible. When markets get stretched and extended away to the downside, bounces will get vicious. Puts are spiking and no doubt, bearishness has picked up. We don’t even have a best guess as the action is going to be very random, especially when Janet sends out a Fedhead to float QE4. We don’t even have support levels right now, just resistance levels on any oversold bounces.
Simply put, we expect wild swings. Just a  few words to the wise. If we have indeed ended the 6 year bull run, everything has changed. Instead of buying the pullbacks, you sell the rallies. Instead of margin, you have some cash. Those “no sales” biotechs that we have warned you about will be crushed. Companies that lose money will be crushed. Past leaders will be creamed. IPOs will stop. Secondaries will stop. Private equity valuations will crack. That’s just the way it works. Everything changes.

That all said, we repeat for you our report we sent out on Thursday It simply explains the process that has been going on for months:

 

Absent a complete 180 by the Fed in where Janet Yellen announces another round of QE (not out of the question), the classic topping process we have been writing to you about all year long looks to be now completing itself as whatever has been holding up the major indices finally have topped.

Very simply, commodities topped out last summer. Other less important areas like disk drives, gaming and a few others joined in. It then turned into all the commodity countries like Russia and Brazil. Then the new highs topped out, the a/d lines topped out which led us into March. That’s when the all-important transports topped out badly which led to the semis topping out in May.

During all this time, we have been using the same language…narrower and narrower and narrower as new lows were outdoing new highs even though major indices were a stone’s throw from the highs. Then the China bubble burst which topped out Asia and Europe.

We then watched as all these money flows came out of all those areas and found a place in the largest of large mega-caps which held the major indices up. You remember the reaction to Amazon and Google? We then saw money flow into the most defensive of areas like food,drugs,beverages, tobacco and household products. On top of that, we have been highlighting for you the biotechs and the financials and that if they broke down, it would be party.

This all led into last month where we thought things were worsening as we started to give you out important longer-term support levels. This led us into last Wednesday where those vital levels were undercut before a major reversal occurred. At that time, we told you not to expect much on the upside. And now those major indices are back into play as today, they were sliced though like a hot knife in butter.

In fact, today:

Financials have broken through important support.

Biotechs have broken through important support.

Glamour growth names have been taken out to the woodshed.

And lastly, all major indices took out support.

The only thing that bid up today was the gold/silver as we wrote in our weekend report to start paying attention to gold as the great Stanley Druckenmiller recently spent a measly $300 million on gold.

Because of central bank intervention, we have not had a bear in over 6 years (too long) and have not even had a 10 percenter in almost 3 years (too long). So comeuppance time is at hand. Our biggest worry remains the one-sided trade. Central banks are good at one thing…creating bubbles and when the bubble pops and crashes, come up with the same elixir that caused the last bubble but this time add a crapload of steroids in the name of 0% rates and a maniacal trillions of printed money…which led to the lemmings in other countries following suit. When the world is on one side and used to only little corrections, they are not ready for the day when a serious bout of ugly happens. This usually causes dislocations, not just little drops. We are very worried about these dislocations!

Keep in mind, further downside will definitely put off any rate hike (doesn’t matter). The only thing that would matter is another round of QE (again, not out of the question). Remember last October. Markets were being blasted until Japan and Europe announced their own rounds of massive printing followed by China’s easing. This stanched the bleeding. Unless Janet turns tail and starts printing, not sure there is anyone left to save the day. Be careful of those who say this is a buying opportunity. They don’t know. Let the market decide. We highly doubt markets go through a long-winded topping process and then just stop on a dime. Careful folks!

Short note on market!

Hey, how’s your day? Writing this from Orlando, Florida. Was supposed to be in NYC this morning but after a 6 hour delay and cancellation city, enough was enough.

Just letting you know, markets are about as extended to the downside and oversold as they get on a short-term basis…but only on a short term basis. This could lead to some violent back and forth action, especially on the bouncing up side. But be careful. Lots more damage has been done to the internals of the market.

More this weekend.

THE FORK

Absent a complete 180 by the Fed in where Janet Yellen announces another round of QE (not out of the question), the classic topping process we have been writing to you about all year long looks to be now completing itself as whatever has been holding up the major indices finally have topped.

Very simply, commodities topped out last summer. Other less important areas like disk drives, gaming and a few others joined in. It then turned into all the commodity countries like Russia and Brazil. Then the new highs topped out, the a/d lines topped out which led us into March. That’s when the all-important transports topped out badly which led to the semis topping out in May.

During all this time, we have been using the same language…narrower and narrower and narrower as new lows were outdoing new highs even though major indices were a stone’s throw from the highs. Then the China bubble burst which topped out Asia and Europe.

We then watched as all these money flows came out of all those areas and found a place in the largest of large mega-caps which held the major indices up. You remember the reaction to Amazon and Google? We then saw money flow into the most defensive of areas like food,drugs,beverages, tobacco and household products. On top of that, we have been highlighting for you the biotechs and the financials and that if they broke down, it would be party.

This all led into last month where we thought things were worsening as we started to give you out important longer-term support levels. This led us into last Wednesday where those vital levels were undercut before a major reversal occurred. At that time, we told you not to expect much on the upside. And now those major indices are back into play as today, they were sliced though like a hot knife in butter.

In fact, today:

Financials have broken through important support.

Biotechs have broken through important support.

Glamour growth names have been taken out to the woodshed.

And lastly, all major indices took out support.

The only thing that bid up today was the gold/silver as we wrote in our weekend report to start paying attention to gold as the great Stanley Druckenmiller recently spent a measly $300 million on gold.

Because of central bank intervention, we have not had a bear in over 6 years (too long) and have not even had a 10 percenter in almost 3 years (too long). So comeuppance time is at hand. Our biggest worry remains the one-sided trade. Central banks are good at one thing…creating bubbles and when the bubble pops and crashes, come up with the same elixir that caused the last bubble but this time add a crapload of steroids in the name of 0% rates and a maniacal trillions of printed money…which led to the lemmings in other countries following suit. When the world is on one side and used to only little corrections, they are not ready for the day when a serious bout of ugly happens. This usually causes dislocations, not just little drops. We are very worried about these dislocations!

Keep in mind, further downside will definitely put off any rate hike (doesn’t matter). The only thing that would matter is another round of QE (again, not out of the question). Remember last October. Markets were being blasted until Japan and Europe announced their own rounds of massive printing followed by China’s easing. This stanched the bleeding. Unless Janet turns tail and starts printing, not sure there is anyone left to save the day. Be careful of those who say this is a buying opportunity. They don’t know. Let the market decide. We highly doubt markets go through a long-winded topping process and then just stop on a dime. Careful folks!

The FED and a Goal-Line Stand Needed

For 3 years, we have been telling you both sarcastically and seriously, THE FED WILL NEVER RAISE RATES UNTIL THE MARKETS FORCE THEM TO. We have been utterly amazed how every month, pundits continue to predict otherwise. The latest nonsense has been September…September…September…the reading has been the Fed is ready…and now we get yesterday’s nonsense. As usual, the Fed teased and then punted again. They now have everyone leaning NO RATE HIKE…thus, there is now zero chance.

The Fed could not give a crap about the economy. They only give a crap about markets. Their only success is in bubbling up asset prices as they think the creation of wealth based on rigged and manipulated markets by the printing of money and 0% forever is a good thing. They know that if markets crumble, everything else goes with it. That’s the problem with the asset bubbles. They always end badly which makes the Fed continue to come up with even more easy money. Does anyone remember the fed-induced housing bubble? That was only a few years back.

Call it blinking. Call it what you want. There will be no rate hike in September and if we are right, the next time down will take us into QE4-land. We remain hostage to the whims of these people that don’t have the foggiest. This remains amazing to watch in real time as Wall Street does not care that one person continues to control the strings. We just had better not ever get to the point where markets actually tank on all this easy money. Then there will really be no answer.

More importantly, the market needs a goal-line stand. We have already reported to you that over 60% of the market is already in bear form. It will not take much to get the rest. In other words, if the market wanted to break, it easily could. Last Wednesday’s big reversal to the upside put an important line in the sand at some long term support levels. It still holds but as we write this, markets will open this morning in the midst of that support day. It had best not break.

Favorite areas continue to be housing-related as rates continue to plunge but now thinking pullbacks are at hand. Areas that must be watched closely here are the financials and biotechs. If they go, trouble! Lastly, you recall this report mentioning this past weekend that Stanley Druckenmiller had taken a huge position in gold. He is one person we watch. Just letting you know gold is now getting a strong bid off of recent lows but need more cards coming out of the deck.