MARKETS BREAK VITAL SUPPORT…AND HERE COMES THE UGLY!

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In our past few reports, we told you that the market’s internals were deteriorating by the day. We then went on to tell you that if the market broke intermediate term support, it would lead to the next leg down. Well, the market is now in the midst of its next leg down…and it is getting downright ugly.

DOW 12,700, S&0 1340, NASDAQ 2900, RUSSELL 780 have now been all taken out…and pretty easily at that. This has caused some serious technical selling. The NYSE has actually broken below the long-term 200 day moving average.

So…by the book:

The market remains in a corrective phase. All major indices have broken support. Foreign markets are worse. We suspect all the major indices will tag the 200 day…and then we will re-evaluate from there. Hardly any stone has been unturned. As we told you, it was not a good thing that defensive areas like food, drugs, beverages and utilities were starting to lead while the financials, semiconductors and retail were breaking down. We would also add that growth stocks are now getting ripped apart at the seams as the momo crowd jumps ship.

There is no way of knowing how long this lasts or how far it goes. But we are still in May. The past 2 years saw the market swoon in May and not turn until October. Our best advice is to have a very sturdy umbrella out because as of this second, sellers have a strong upper hand.

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.