MARKET NOTES AND MORE
BY GARY KALTBAUM- OCTOBER 23, 2018
“The sea was angry that day, my friends – like an old man trying to send back soup in a deli.”
George Costanza
So let’s recap what we saw, what we said and where we stand:
World markets turned bearish months ago and never came back.
The U.S. market had only about 50% of it in good shape while the DOW kept moving to new highs into early October.
While the DOW kept moving into new highs in early October:
Amazingly, new yearly lows picked up. A who’s who of industry were hitting new yearly lows…again, all while the DOW was hitting new highs. HOUSING, HOUSING-RELATED, AUTOS, METALS/MINING, MATERIALS, CHEMICALS, PAPER, FOREIGN MARKETS…and that’s for starters.
Advance/declines topped out while the DOW hit new highs.
More and more names and more and more sectors started to break down (the other 50%)….while the DOW was hitting new highs.
GROWTH STOCKS were topping out while the DOW was hitting new highs.
Small and mid-caps broke down while the DOW was hitting new highs.
TRANSPORT names broke down while the DOW was hitting new highs.
The two most important areas to our work, FINANCIALS and SEMIS broke down while the DOW was hitting new highs.
We did not believe those who have been calling for a bottom every day.
We did not believe the many that said the market cannot go down because the economy and earnings were strong. In fact, markets look forward, not backwards. We were worried about what markets were telling us going forward. If this continues, we will eventually find out.
When markets do indeed top, money flows out of risk and parks itself into the largest mega-cap, defensive areas before even those areas succumb to the overall weakness…thus the DOW strength.
This is the worst we had ever seen the internals of the market with the DOW only down about 6% from the highs.
Defensive areas are starting to lead…GOLD, CONSUMER STAPLES, UTILITIES…
THE FACT WAS THE BROAD MARKET WAS ALREADY BEARISH AND WAS JUST WAITING FOR THE POPULAR INDICES TO FOLLOW SUIT.
If we take out the recent lows, we expect a “give up” as the big institutions that were defending longer term support, “give up” as they see just how weak things are.
This morning:
This morning, the market will open poorly. First, if they cannot reverse today’s pre-market nausea, do we dare say another leg down? The “give-up phase?” A few are calling for, actually hoping for a reversal today. Reversals are always a possibility. They are just guessing. We predict nothing. A big reversal would be good news near-term but would still not change the big picture. The only good news right now is that MANY are going to convert to the bearish side.
The media who hardly covered 9,000 DOW points to the upside will now cover the “TRUMP DUMP” 24-7.
Trump will blame Powell.
Powell will no longer raise rates this year.
If this indeed means the economy is stalling, expect the next Powell move is to lower rates.
Trump made up this latest tax cut out of thin air yesterday to stanch the bleeding. The market was ignoring the China meeting b.s. so had to go to something else. There is no chance of another tax cut any time soon.
Every 100 DOW points will matter to November 6th.
As we have stated, it is not the news, it is how markets react to the news. CAT is down $11 and MMM is down $16. Europe will be a problem. Asia will be a problem. Debt and deficits will be a problem. Remember, it is only bad when markets come down.
The Giants are still pathetic with a coach who should not be coaching high school.
If we win the megamillions, you will find us in our new Amalfi Coast office.
Wish we had better news. If this is a top of consequence, it will be another in a long line of classic tops…played out like most tops we have experienced…in textbook fashion.
Really love your clear and concise market observations
Thank you Gary
“If we win the megamillions …”
I know you had to take a statistics and probability class in college. Were you not paying attention? You should be able to apply the concepts taught in that course to know all lotteries are sucker bets.