The Bear Market Is Not Over Yet, May Have Two More Waves - SPDR Select Sector Fund - Utilities (ARCA:XLU), SPDR S&P 500 (ARCA:SPY)

Gary Kaltbaum was recently a guest on #PreMarket Prep, a daily trading idea radio show hosted by Joel Elconin and Dennis Dick. Tune in to the daily broadcast live Monday-Friday at 8 a.m. ET here.
The SPDR S&P 500 ETF Trust SPY is down 8.5 percent this year, with 10 percent of that decline coming since mid-August.

Kaltbaum Capital Management President Gary Kaltbaum said that while traders should be "open to anything," he believes that markets have just experienced the first wave lower in a bear market.

In the immediate term, Kaltbaum said that there would be "backing and filling," where markets trade in a range defined by the recent highs and lows before ultimately moving back to the flash crash lows.

Gary Kaltbaum had a warning for traders who believe the market has bottomed: "You will get run over as this continues."

Kaltbaum said that bear markets are always characterized by various traders calling bottoms, but it usually doesn't happen after the first month.

Instead, Kaltbaum said that the past month is likely the first wave in what could be a three-wave move lower. Though he cautioned repeatedly that the market could "bounce" from current levels, Kaltbaum said that prices should be constrained by overhead moving averages. The SPDR S&P 500 ETF's 50-day moving average is at $201.49, while the 200-day moving average is at $206.45.

Any Gainers Ahead?

Kaltbaum said that there are no stocks yet that he thinks will gain as the overall market moves lower, though utilities may be "hit the least." That certainly seems to be the case over the past month. As the SPDR S&P 500 ETF moved 10 percent lower, the Utilities SPDR (ETF) XLU only dipped 6.5 percent.

Ultimately, "Markets will do what they want to do, regardless of what you think," Kaltbaum said. However, if the markets break the flash crash lows, he predicted that individual investors will start to use the term "bear market," which is when things might unravel. Kaltbaum said his favorite place at the moment is in cash.

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