THE BREAKOUT
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This past weekend, I wrote to you that the market was set up in a bullish pattern…and all the market would need to do is to go topside. That move looks to be occurring. Keep in mind, there is no rule that says a breakout to new highs won’t fail. It is just important to recognize when one occurs. A few thoughts:
Never underestimate the power of central banks to conjure up trillions of dollars and euros that were not there yesterday. There is no doubt in my mind that this market is reacting to that…and that alone. It certainly couldn’t be the recessionary numbers coming out of Europe. It certainly couldn’t be the slowdown in China. It certainly couldn’t be the under-2% growth in the U.S. It certainly couldn’t be an anemic unemployment rate…though I wonder what rabbit comes out of the hat for the next couple of fake job’s reports leading up to the election.
This is all about massive liquidity. It has worked since March 09 and now with Europe joining in…looks like it will continue to work. Bernanke has targeted the market…leave no doubt. In his recent Jackson Hole speech, he actually said this: “LSAPs (Large scale asset purchases) also appear to have boosted stock prices, presumably both by lowering discount rates and by improving the economic outlook; it is probably not a coincidence that the sustained recovery in U.S. equity prices began in March 2009, shortly after the FOMC’s decision to greatly expand security purchases. This effect is potentially important because stock values affect both consumption and investment decisions.” So as you can see, this one man, on purpose has been and for that matter, has been successful at manipulating markets up. The problem with all this is simple. The markets are pretty much dependant on the whims of one man who can conjure up trillions at a moment’s notice…or no notice at all. What if he decides the opposite?
Technically:
The S&P, NASDAQ and the NDX have moved above resistance. The DOW and the RUSSELL are now knocking on the door. It is good to see the small-caps joining in as well as the mid-caps.
A whole host of sectors have also moved above resistance.
The market could not get going without FINANCIALS. Both the XLF and IYF have both broken above resistance. Many banks are breaking out of bases.
NEW HIGHS are finally expanding. As major indices move into new highs, many of the stocks that make up these indices move into new highs.
Nothing but good news on a technical basis here. It is also good news that because of all the economic bad news, no one believes in this market. One can understand…but again, trillions is trillions.
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.