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business newsStock Market: Horrible Action but Beyond Oversold
By
Gary Kaltbaum
Nov 28, 2011 10:20 am
The good news is that this stretch of time into the end of the year has had a great reputation for being an up period, but so far, nothing doing.
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There is not much good I can come up with. Technically, nothing but a horror show as just about everything has broken support. The good news is that this stretch of time into the end of the year has had a great reputation for being an up period, but so far, nothing doing. Still, one must be aware of the fact that seasonality is on the market's side. At the same time, markets are stretched, extended and oversold into this time window. Markets may be about as oversold as they were back on October 4...so be aware. Of course, be aware that this remains an amazingly news-driven environment, moreso than I have seen in ages. I do not expect that to change -- especially out of Europe, which seems to have the "save of the day"!
But that's it for the good news.
Major indices failed in and around the 200-day average -- a place that defines bull and bear for me. On top of this, they all have now broken back below the 50-day average.
The new low list has picked up markedly, before the major indices have hit new lows -- not a thrilling sign. The new high list never really expanded on the way up.
Foreign markets remain much worse than US markets. This is an important sign of continued trouble. Typically, foreign markets lead both up and down, as they are less liquid than ours.
My proprietary percentage of how many stocks are in good shape has dropped to about 20% -- a sickly amount. It is much worse on the sector front. As of this second, I have only a handful of sectors in good shape, led by Tobacco and discount retailers, which are defensive.
As I have said on several occasions, most of the big leading growth stocks have now put in major tops. There are not many better indicators than to simply to follow past growth leaders. Names that come to mind are Apple (AAPL), Amazon (AMZN), Baidu (BIDU), Lululemon (LULU) Priceline (PCLN).
The SOX is in freefall. This is another area that has led markets both up and down.
Financials continue to have no bid, and continue to have insider selling down at recent lows.
Not much to chew on. It is what it is. It really doesn't matter what you call it. Again, the near-term good news is that the market is way beyond oversold in here as it heads into the midst of seasonal strength. I will be watching to see if we get any strength in here and then I will know a lot more about how the market bounces. But be warned: If the market cannot turn up nicely into December, I am already thinking about January being a doozy.
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No positions in stocks mentioned.
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