Monday, January 28, 2008

Gary Kaltbaum NewsLetter

Subject: NIGHTLY FOR MONDAY


Down legs in bear markets end with heavy volume reversals just to suck out the last sellers at the most inopportune time. That occurred on Wednesday. But amazingly, many were already out calling THE bottom of the bear market. Some of these pundits have called the bottom about 10 times in the past few months. This is folly. In my study of bear markets, you need to know that they just don't end in one day...but go through a process of bottoming over time. I just do not believe we are there yet. I have no idea about price and time but I do know how bear markets end...and they certainly do not end when many are calling the bottom. Here is my next guess based on my studies of characteristics of bear markets. I suspect we're going to see what I call ABC-type action where the A move was the first move off the low, which may have just ended...the B move is the next move down, which probably started on Friday's reversal...and the C move which is another rally which may or may not tak e the market back above recent highs. Just keep in mind, this rally only serves to work off the very extended and oversold condition the market created on its drop. So...while I believe the recent reversal low could hold near term, I am not so sure we are out of the woods. There are just too many stocks and sectors that are horror shows. The last point I want to make is about Friday's action. The market opened up in a frenzy with many heralding Microsoft and its earnings as a reason to NOW BUY TECH! By the end of the day, those people were back in their caves. If there is anything you need to know about bear markets, it was all encapsulated in Friday's action as a frenzied open failed and failed miserably and "good news" in Microsoft was sold off. This type of action does not occur in bull markets. In bull markets, "good news" like that is bought and bought and bought. Learn this characteristic. It is right there for you to understand. In bull markets, bad news still gets bo ught and good news is bought with a fervor. In bear markets, good news is sold and bad news is crushed.
All I have wanted is a good bounce to short into. We got less than 2 days on Jan 9 and this bounce may be failing already after just 2 days. I hate this. Friday morning, looking back, was a good short...but I hate guesswork.
The bear is getting em all...UTILITIES and DEFENSIVE issues are now even being crushed. COAL is strong...FERTS have come back up nicely but they are close to a short also.
This is not going to be an exact science...but we will look to short the weakest of the FERTS...AGU in the morning...but only 25% probe. If it starts to work, we add.
Also, we will look to do the same in NDAQ as it has come straight up to the 50 day. Stay tuned for pre market report. I have hundreds of bad charts to short into resistance.

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