Two weeks ago, I wrote to you about the continued deterioration in the market. Soon after, the market got a boost out of more easing talk from the fed. But the bump was fleeting…and now…as George Costanza once said: “THE SEA WAS ANGRY THAT DAY MY FRIEND, LIKE AN OLD MAN TRYING TO RETURN SOUP AT A DELI!”
To put it simply, odds favor the complexion has changed for the market. The scorecard:
For starters, it is May.
Throughout most of the bull move, commodity stocks could not keep up. This is in stark contrast to the past where typically, they would follow the market up. They are now breaking down even more. This includes steel, coal, copper, oil, gold, silver, metals, mining and the like.
The SEMICONDUCTORS are now under serious pressure as they failed badly on the rally up…and now are croaking. Those who have followed me throughout the years, know how much weight I put on this group. Speaking of a group I put serious weight on:
FINANCIALS have now broken the bearish wedge they had been forming to the downside as the XLF and IYF break the 50 day. JPM was the latest to slice through support while many other big names like BAC, C and MS are even worse.
To go along with the commodity stocks, oil prices are breaking down. This is good news at the pump…but bad news for the market as it is indicating something not so good.
European markets remain much worse than our market. In fact, most around the globe are no great shakes.
Every major index is now below the 50 day moving average with the small caps and the NYSE continuing to underperform badly.
Fewer and fewer stocks and sectors are working and the ones that are, for the most part, are defensive. In the past couple of weeks, we have seen outperformance by the REITS, FOOD, DRUGS, BEVERAGES and UTILITIES.
The almighty APPLE gapped up on earnings and has since failed miserably…slicing through the 50-day on Friday.
So…I have not much good to say…knowing that Bernanke can again act like he is long S&P futures and announce another numbskullish printing of money.
If things get worse, the RUSSELL will break down first as it is closest…watch the 783 support. S&P support lies at 1357 and then 1340. The NDX support lies at 2629 and then 2575. The DOW support is at 12710. The DOW will hold up better if things worsen as money flows out of risk and into megacaps.
If these next support levels are taken out, many will be talking about why…and blame it on Europe, a socialist being elected in France (though we have one running the U.S.), a slowing job’s picture and of course, the massive debt. Keep in mind, most of this never went away. Remember what we have always told you…nothing is bad until the markets say so.
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.