Market into massive overhead!

By Gary Kaltbaum
Kaltbaum Capital Management
@GaryKaltbaum
garyk.com
Fox News Business Contributor

Late last week, we told you we thought a low was being put in. After Friday’s action, we told you we thought a good low was put in and odds favored a turn in the China markets as well as the oil markets. Little did we know that these areas would be jammed to the upside in the fashion they were. All this came from three strong reversals to the upside while we saw oils and China turning the corner. No doubt, short covering was a huge help as many were caught napping.

We continue to keep the stance that the August and now October lows will not be taken out any time soon but:

Near term, markets are now beyond overbought and stretched on a near-term basis. On top of that, major indices are now into the meat of massive overhead resistance in which they broke down from. We would not be surprised that as we enter the vital earning’s season, things start to slow down and even pull back. We say the same thing for the “jam” in the oils as well as all the commodity areas as they look about ready to pull back from their recent moves off their low.

Bigger picture, there are many things that stick out for us that you need to know about.

While the worst areas in the market had the biggest moves last week, the strongest relative strength areas barely budged. Keep that in mind.

While there was improvement with our scans, there are still only about 25% of stocks in good shape. That is not a number that leads to new bulls. On top of that, there was hardly any movement in our sector analysis as right now, there are just a handful of areas that we consider to be longer term bullish. Of course, this can change.

Nothing like one good week to get the bulls chirping again and the bears cowering. In just one week, our sentiment indicators have shifted markedly. Keep in mind, sentiment is secondary to price and volume.

Market tops are a long-winded process. Time will tell how this plays out but the last two big tops back in 2000 and 2007 saw big drops and big rallies to relieve the drops…only to eventually fail badly. Needless to say, more cards will need to come out of the deck…and for sure, a lot more leadership had better show up.

Earnings season is at hand. In particular, we will be watching all the financials that report this week. At this juncture, they are acting poorly and lagged badly on this recent rally. Markets need strong financials.

And lastly, if Derek Jeter was rolled over by Utley, it would have been called a double play and the rule changed overnight. Dirty play!