Kerplunk Goes the Market

 “Kerplunk Goes the Market”

By Gary Kaltbaum-August 10,2015
@GaryKaltbaum
garyk.com

Kerplunk:

The object: try not to lose your marbles. Ker-Plunk takes a steady hand, as you skillfully remove the sticks from a marble-filled tube. A clear plastic tube is filled with marbles, which are supported by crisscrossing sticks inserted through the tube. Each player takes a turn removing a stick from the tube, trying to dislodge as few marbles as possible. As the game progresses and fewer sticks remain, it gets harder to keep the marbles from going ker-plunk! Play continues until all the marbles have fallen. The player with the fewest marbles in his compartment wins!

Kerplunk, the stock market…it’s all the same. Well, almost. Kerplunk is a game, The stock market is about your hard earned dollars.

In the stock market, think of the marbles as the major indices. Think of the sticks as all the sectors and all the stocks that make up the market. As more and more sticks are pulled, the less marbles (leadership) are left until it all (the indices) come down.

This is the exact process we have been telling you about for weeks and months. To be blunt, more sticks are being pulled and more marbles are falling. Just in the past week or so, the market has lost the almighty Apple, lost Disney (both stocks in the Dow), lost the whole media complex on the Disney cable news and now we are starting to lose the biotechs and the glamour leadership that has held up so well. And to be clear, Biotech has been the glamour leader for some time. So just add this to the transports,semis, commodities,high yield and all the other areas of nausea…

It is also instructive that money has been flowing into the recession-resistant, defensive areas like utilities, food, drugs, beverage, tobacco and household products. WHEN THE MARKET GETS DEFENSIVE, IT GOES DEFENSIVE. It is not a thrilling sign when these areas start to lead the market and it is even less thrilling for the economy as they usually telegraph a good slowdown.

We have recently outlined important support levels for the major indices. Some have been taken out like the Dow…which is now working on another support area. We are getting to the point where you had better be watching closely as the topping part of the process may be getting late in the game. After the topping comes the downtrend. So…S&P 2044, Nasdaq 4974 then 4901, Dow 17038. The Dow remains the weakest at this point. As long as these areas hold…well, they had better hold. Shorter-term, maybe we saw a near-term low late Friday but would not make a big bet on it.

Keep in mind, if markets cave, there will be no chance of a “ceremonial” rate hike by the maniacs at the fed and if things get real icky, expect some noise out of one or two fedheads about QE4. Not kidding! That may or may not help things.