Improvement But…

“IMPROVEMENT BUT…”
By Gary Kaltbaum-6/22/15
@GaryKaltbaum
garyk.com
For the hundredth time, the Knicks will win the NBA championship before the fed raises rates.

Greece…when a ton of your government spending is for early- retired government workers who make up a  large part of total workers, you have no chance. When will they realize the best move is to rip the band-aid off quickly?

We get accused too often of being bearish. We get it. When you say the word “bubble” all the time, it is not a reach to think one is bearish. But readers of this report know where we stand. It is not the bubbles we have problems with. We love how much coin one can make in bubbles. It is the outcome of bubbles we do not like because the loudest noise and the most greed shows up nearer to the highs. An unwary public believes the good will never end. That is when the masses get caught.

As we have stated, until support is broken on the downside, things remain in tact. We must admit, it looked like that would happen several times over the past few weeks, but each time the market defended itself. Simply put, not much has changed for us. We remain bearish on half the market. We are bullish on the other half. This remains the most split tape we have seen in ages with so far, very little changing week to week. The good news is that there was improvement this past week as markets realize the Fed has no interest in raising rates.

Last week’s action was a case of improvement but still with a lot of warts.

It is good news that the Russell 2000 and the Nasdaq edged above new highs. Just keep in mind that other indices have not.  Neither the Dow nor S&P have joined in with the Transports continuing to act like the south end of a north-bound jackass.This is a short-term divergence that needs to be watched. It is also good news that the Biotechs edged out of range. We have been telling you that the Biotech group is the most important area to the market as this is the “risk on” group. When money is buying risk, it is usually good news. It is also a positive that  the Financials are still acting well but near term, are on pullback mode.

But the issues we have had for a long time remain.

Too many IPOs with the bar being lowered by the day…too many secondaries…margin and leverage at record highs…new highs versus the market are a joke…the number of groups and stocks in good shape not even close to where major indices are. All these divergences, if not overcome, always leads to trouble down the road. One just does not know when “down the road” is but one does know where support lies. And until that support is broken, we remain bullish on what’s working and bearish on what’s not.

So…we continue to be bearish on a slew of areas. Even with the midweek rally, we did not see any changes in them. These areas include: (we made the list the long way so you can see how many areas remain crappy)

Bond market…though shorter-term, we think a low is being put in. We remain bearish on corporates as well as high yield.

Energy/oil&gas…in fact starting a new leg to the downside.
Gold/silver
Coal
Steel
Reits- of all kinds
Utilities
Rails
Disk drives
Airlines-but near term low as oil may be headed lower again.
Truckers
Gaming
Tobacco
Beverages
Gold stocks
Aluminum
Household products
Food
Paper
Semiconductor Equipment
Coal
Solars
Autos
Metals/mining
Fertilizers
Retail…mixed bag
Emerging markets

 

We continue to be bullish on:

Financials
Banks
Investment banks
S&Ls
Regional Banks
Insurance-life
Managed care-buyout city!
Retail-drug stores…turning corner again
Cyber security software
Pharmaceuticals
Biotech…where biotech etfs broke out this week. We continue to believe this is where the risk on trade is. As long as this area does well, market will hang in there.