In having the privilege to appear on television, host a national radio show as well as write to you, I am always measuring my words carefully. At junctures like this, even more so. The market has obviously turned bearish and most likely, the past five months were nothing more than a topping out process that I have written about so much. For me, the completion of that process is a break below the 200 day…which has now occurred for just about everything.
World markets are amazingly worse than ours. I just need to remind you that if indeed this bear phase has more to go, you need to know the rules are different. In bull phases, oversold conditions start new rallies that last and go into new high ground. In bear phases, oversold conditions only serve to halt the selling for the time being until the selling shows up again. This usually occurs on a bounce, typically a vicious bounce which tends to get everyone bullish again. So be careful. The trees is the short-term maniacal action…just like today’s whipsaw The forest is the big picture…which as of this second, isn’t pretty. Yes…there will be great trading opportunities if caught correctly…but it is always better to trade with the major trend. As always, you get to pick your poison. My best guess remains at the very least, this will turn into something akin to last year in which major averages dropped 15-20% from their highs before turning up. If that occurs, at that point, I reevaluate on whether the so-called 20% bear market threshold gets taken out. I do know the Fed is out there and more than likely, a QE3 will be announced. I am not so sure it will have the same effect as the first two as markets become smarter and smarter on whether something like printing money will work again.
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.