To continue with my thoughts on Friday:
For the near term:
It is good news that the NASDAQ showed great relative strength versus all the major indices. As I have told you for years, the NASDAQ is the risk index. It leads up and it leads down. Let’s just hope this continues.
Technically, I think a good low has been carved out…for now. This simply means the recent lows which were retested early last week are going to hold…for now. When I use the term “for now,” it means just that. I have been asked on numerous occasions over the weekend whether we have seen the low…and not a low. I don’t take anything off the table. After all, that was one ugly drop. The good news is that during the week, the market did experience a follow through day. This has occurred before every bull move in history. Unfortunately, not every one of these days led to a bull move. But for now, until big distribution shows up again, we adhere to it.
As far as this burgeoning rally off the recent lows, just remember what I told you. When markets get too extended to the downside, eventually, they will revert to the norm. So as an exercise:
The Dow closed at 11,284 with the declining 50 day at 11,950.
The S&P closed at 1177 with the declining 50 day at 1260.
The Nasdaq closed at 2480 with the declining 50 day at 2660.
The NDX closed at 2162 with the declining 50 day at 2270.
The Transports closed at 4460 with the declining 50 day at 5050.
This is in comparison to what I wrote on August 22. On that day, I told you that eventually price is going to meet the moving averages as markets revert to the norm. It is exactly what we are seeing. We will know a lot more as they start to get closer.
From August 22:
“The DOW is at 10,817 with the 50 day moving average at 12,000.
The S&P is at 1123 with the 50 day moving average at 1275.
The NASDAQ is at 2341 with the 50 day moving average at 2680.
The NDX is at 2038 with the 50 day moving average at 2275.
The TRANSPORTS are at 4221 with the 50 day moving average at 5100.”
Markets opening up strong today as all is now better.
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.