HORRIBLE ACTION BUT BEYOND OVERSOLD!
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On November 9th, I wrote this:
“Take away all the noise. Take away the resignations in Europe. Take away the TARP. Take away the printing of money. Take everything away. The most important thing I am seeing right now is a potential wall being built at the 1250-1280 S&P area. Take a look at the vicious selling on 10/31 and 11/1 combined with today’s early action and you have nothing more than the potential for serious resistance shaping up at these levels. If that’s the case, I expect to see some tough sledding in the near term. Already, I am seeing some of the weaker areas shaping troublesome charts. Nonetheless, this market is going to remain a tough proposition on a daily basis. That has not changed.”
On November 15th, I wrote this:
“On top of that, markets are sitting in a very nice triangle pattern here. The midpoint is at about the 1255 S&P area. One good up day takes the market above the triangle. Of course, one bad down day takes you down below the triangle…but with seasonal strength, hoping for the upside. Of course, don’t blink as this remains one of the toughest market environments I have experienced. Resistance remains in the 1250-1280 S&P area…with the financials remaining an anchor while the semis continue to provide some wind.”
And on November 17th, I wrote this:
“The triangle pattern, which had tightened up in the past few days, is now resolving itself to the downside. This is occurring as the all-important semiconductor index looks to be topping. Many past growth leaders look to be completing major tops including the likes of Apple, Bidu, Amazon, Priceline and others. The financials continue to lead down…and in a very bad way. Lastly, the NDX has sliced through the 50-day moving average with the Nasdaq right behind.”
Since, the market has been trashed. Major averages have dumped about another 5% since the triangle broke. Now what?
There is not much good I can come up with. Technically, nothing but a horror show as just about everything has broke support. The good news is that this period of time into the end of the year has had a great reputation for being an up period but so far, nothing doing. But one must be aware of the fact that seasonality is on the market’s side. At the same time, markets are stretched, extended and oversold into this time window. Markets may be about as oversold as they were back on October 4th…so be aware. Of course, be aware that this remains an amazingly, news-driven environment, more than I have seen in ages. I do not expect that to change…especially out of Europe which seems to have the “save of the day!”
But that’s it for the good news.
Major indices failed in and around the 200-day average…a place that defines bull and bear for me. On top of this, they all have now broke back below the 50 day average.
The new low list has picked up markedly…before the major indices have hit new lows….not a thrilling sign. The new high list never really expanded on the way up.
Foreign markets remain much worse than our markets. This is an important sign of continued trouble. Typically, foreign markets lead both up and down as they are less liquid than ours.
My proprietary percentage of how many stocks are in good shape has dropped to about 20%…a sickly amount. It is much worse on the sector front As of this second, I have only a handful of sectors in good shape…led by Tobacco and discount retailers….which are defensive.
As I have told you on several occasions, most of the big leading growth stocks have now put in major tops. There are not many better indicators than following past growth leaders.
The SOX is in freefall. This is another area that have led markets both up and down.
Financials continue to have no bid….and continue to have insider selling down at recent lows.
Not much to chew on. It is what it is. It really doesn’t matter what you call it. Again, the near-term good news is that the market is way beyond oversold in here as it heads into the midst of seasonal strength. I will be watching to see if we get any strength in here. I will know a lot more about how the market bounces but be warned, if the market cannot turn up nicely into December, I am already thinking about January being a doozy.
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.