Housing Could Still Be in Trouble

Don't forget to date your checks 07. This year, it only took me a week to realize I was still dating them 06. Last year, I was dating checks 05 in March.

That wonderful man Hugo Chavez says he is going to nationalize telecommunications firm CANTV TELEFONOS. Here is a chart of the stock after the announcement. I wouldn't own a share of anything Venezuela-based right now as Castro Jr. is in power. Amazing that the Venezuelan people do not see what is coming if this nut-job continues to run the show.

Chart courtesy of StockCharts.com

Wow...loads of crosscurrents to start the year.

Until the DOW, S&P, NASDAQ and NASDAQ 100 break just short-term support or moving averages, these areas keep the benefit of the doubt. We are just continuing to see UNDERNEATH THE SURFACE action that gives us a wake-up call. By itself, an index breaking support is no big deal but when you see a few things happen at the same time...

The UTILITY index broke the 50 day average as well as near -term support.

The RUSSELL 2000, MIDCAP 400 and SMALLCAP 600 broke the 50 day average as well as near-term support...though they did hold nicely on Monday.

HOUSING stocks have all but ended their rally off the lows. They had a series of higher lows going for them...but that is now over and done. As we have told you, we believe the HOUSING problem lasts a lot longer than all the pundits think...including Alan Greenspan who continue to call for a bottom. They have obviously not studied past HOUSING cycles.

WORLD MARKETS were in dire need of a pullback. Not only did they pull back but many markets were hit hard...and a few markets completed what we believe were climax runs...which usually ends a move. A glance at many foreign ETFs show tops and some are already showing breakdowns.

The TRANSPORTS, though improved because of the recent plunge in OIL, remain relatively weak. A move above 4709 would potentially change that stance...but as of this second, it remains range-bound...under moving averages.

OIL PRICES had a mini-meltdown this past week. In recent reports, we told you OIL PRICES were on the ledge and could break down. OIL STOCKS went along for the ride. We continue to believe any bounce is sellable and potentially shortable for the entire ENERGY complex.

COMMODITIES and COMMODITY stocks have followed suit along with the OILS. COPPER, ALUMINUM, STEEL, COAL and the like are now in their own private bear phase...and should be sold into any bounce. GOLD/SILVER also put in solid tops in the past week. Again, we would use any bounce to sell into as all in all, COMMODITIES of all kinds are now in a bear phase...which should be underweighted or sold on rallies into resistance. We suspect COMMODITIES of all kinds are about to bounce as they are deeply oversold on a near-term basis.

For a big change, REITS are acting very toppy here. Just take a gander at (IYR | Quote | Chart | News | PowerRating)...a break below $81.69 would carry some significance.

Chart courtesy of StockCharts.com

That's what is not working...but plenty is still working. In fact, we are seeing good action in a slew of leading growth names. We always like when leading stocks are in gear.

There is more good news in that the NASDAQ/NDX are setting up in a new base. A break above resistance and another leg up ensues. We could not say that at 3 pm last Wednesday as both were in big trouble until the market received a late bounce led by TECHNOLOGY...specifically BIG CAP TECH. There have been times in the past where the "market" got into some trouble...and TECH moved by itself or just outperformed. We believe, until things change, some of these BIG-CAP names can be exploited if they break out of proper bases. Look for a move above 2471 on the NASDAQ and 1825 on the NDX. Despite underlying weakness elsewhere, these breakouts are a distinct possibility.

Gary Kaltbaum