Super Chart Flashes Rare Signal – Only 9th Since 1965

Well, what do I say?? As of the close last Friday, The Maxx Super Chart flashed a full-blown BUY signal. The last signal it generated was the SELL signal on February 8, 2008, over 18 months ago. So, am I impressed? YOU BET!! I have followed the Super Chart for a number of decades and I am always excited when a signal is flashed.

OK, so now what, you say. Well, the signal that flashed a 50% BUY commitment last July 25th now says the rest of the portfolio allocated to stock purchases should be committed. What stocks should you buy?? Well, I will leave the specific stock selection to you, as you know your likes and dislikes better than anyone else. Now understand, that’s not a cop out. I just don’t give personal portfolio recommendations, as I am not registered for that. But, as I said last week, I will continue, from time to time, to present a stock I find of interest for you to further investigate. And, hopefully one day, I will be able to offer a way that you can check your own stock picks on my Maxx Super Chart. But, that is still down the road a bit.

However, let me give you a guide that I believe will get you started in the right direction. I always watch stock sectors and the following ten sectors are the top ten ranked as follows (with the number of companies followed in each sector shown in brackets after the name and the percent price growth of the sector for the last six months shown next): (1) Broadcast [26] +90.6%, (2) Printing [10] +81.8%, (3) Textile [35] +69.1%, (4) Oil & Gas [24] +68.7%, (5) Electrical [30] +64.9%, (6) Leisure & Recreation [29] +64.4%, (7) Mining [105] +63.3%, (8) Auto [46] +59.5%, (9) Tools [8] +57.9%, and (10) Lasers [19] +56.0%.

Now, you will have to take it from here to pick out your favorite stocks from these groups, which contain a total of over 240 stocks, surely enough to fill any needs you have. And why the top ten sector? When power is exhibited in a sector and a move is on, that sector tends to stay strong until the move begins to approach its price top. Need I say more?

Ok, let’s move on. I told you last week that I was going to give you some valuable info on the Bond and U.S. Currency markets, so let’ s go to that right now.

I have included a Super Chart on the Bond market 30 year bond below. This chart tells it all, as far as I am concerned.

First, note that this is a weekly chart that goes back to July 2007, nearly a year before the recent market meltdown really got started. Also note that all during this time, the bond chart price never got below the blue shaded area and only twice (in June 2009, August 2009) dipped its toes below the all important Super Chart Keyline (the heavy red line on the chart).

Currently, the bond Super Chart Keyline is well below the close of last Friday at 116 6/32. Also, note that the “Momentum Section” of the chart (at the bottom), shows the near setup of a price rally resumption possibility. This setup shows that the slow momentum line (black line at reading of 50.02 – hidden by the green price marker) and the fast momentum line (the green line at 50.02), are both in the neutral area (on the scale of 0-100, this area is between 40-60 on this lower chart) at exactly the same reading! This “setup” will lead to either a resumption of the bond price rally, a fall in bond prices or a sideways move in bond prices that lasts for a number of months. Why? Because such a rare chart position is typically a precursor of some major market activity. For now, that is all the chart is telling us. Something is about to happen and all we can do is wait and see, but at least alerted that something big is afoot.

Now, let me put all this in a little plainer English. First, holding above the Super Chart (red) Keyline means that the Bond guys are NOT seeing a near term (6-12 months) huge increase in INFLATION. That is key here. The chart showed that bond prices pulled down to the Keyline on August 8, dipping just below it for one week. Clearly, that was a warning that the Bond guys were afraid for a bit that inflation might rear its ugly head, big time. But, then prices rallied sharply away and up from the Keyline, telling us that they changed their mind very quickly. Why? I don’t have a clue and, frankly, trying to figure it all out is a waste of precious time. The chart says it all and right now the important thing is that the bond price did not fall below the Keyline at 116.10. It says no inflation on the horizon, so all we need to do is adjust our portfolios accordingly. Be a buyer! Be assured that I will watch all this for you and keep you advised.

Now to the U.S. Dollar chart.

I am showing this chart back all the way to early 1999. I do so to give you a very clear picture of what is going on here. In 2002, the Dollar index stood at over 120, as you can see. Over the next 3 years it dropped to the 80 area, a decline of 33% in three years, a pretty hefty decline (see the circle in late 04, early 05).

Now, in spite of what you have heard, the decline of the dollar is not all bad. At 120, we were not able to compete for world exports at all, as our dollar relative to other currencies made it price prohibitive for other countries to buy our products. The result, huge deficits in the import to export ratios, jobs in many industries disappeared, and U.S. companies often found the only markets for their products was the U.S. consumer.

Now, all this changed from 2005 to mid-2008. As the dollar continued to decline, U.S. companies suddenly became very competitive in the world markets with products that were and are recognized as top quality and often quite superior in quality to products made in other parts of the world. When this occurred, the deficits in U.S. import-export numbers began dropping by huge amounts.

But, then came the market meltdown and everyone gang tackled the dollar, buying it in huge amounts because it was the only world currency they trusted. You will note that all during the 2002 to 2008 decline, we only once popped above the Super Chart Keyline, briefly in 2006, before the meltdown rally in 2008.

How interesting that despite all the trash talk about the dollar at the time, every big money source showed their real stripes and bought the only currency they really, really trusted. Funny how under duress, the real truth comes to the surface, isn’t it? But that is a subject for another column.

So, what is the chart saying today?? Well, falling below the Keyline last June and the blue area last month says that we are going to continue to see a lower dollar and a better environment for exports. Second, I expect that we might even try the last low in the 70-71 area (April 2008 – see circle). We closed last Friday at 76.43, still a fair distance from that low.

So, for now, we just watch. The bonds say no big inflation and the dollar seems to be adjusting a bit lower. That is still a good environment to be a stock buyer. But, let me caution you here. We do need to tend to our knitting and keep a close eye on the S&P Super Chart “headline.” That “headline” is now very important!

But, before I move on, yes, I do hear your question about gold very clearly. Buy Gold? Yes. I believe that every portfolio needs at least 5-10% in gold or gold equilivents (GLD, CEP, etc.) because prudent investing always says keep some hedge to the fiat currencies floating around out there (including the U.S. dollar). But, to go all in to gold? I would never do that, period.

OK, let’s move on to the S&P Super Chart to expand on the last comment I just made about the “headline” on this chart.

Last week, I told you we were approaching a CRITICAL moment for the S&P Super Chart. It clearly looks like that moment resolved to a continuation of the rally. I expected it might take several weeks to know this, but the market clearly says otherwise. I still look for the head and shoulders formation target to be hit at about S&P 1220-1260 (about 11,500 or so on the DOW), and I still think it will be first quarter that we get there (late or even possibly early second quarter). But, the ONE BIG proviso remains! We need to stay above the HEADLINE on the chart. Crossing below that will set off all sorts of bells and whistles that I will cover for you if it happens. (It was what I began to watch for last week.) But, that does not now appear to be a concern. ALL-IN says The MAXX Super Chart, boldly flashing its BUY signal as of last Friday!

And just so you don’t go away without at least one stock chart I thought of interest, I picked a stock at random from the “Printing” sector because it was about to cross up the Super Chart Keyline and has been in a perfect move to setup for higher prices since mid- August. The stock is SGK, Schawk Inc., their class A stock.

Granted we still need to cross up the Keyline, but the sideways movement of the price for two months is what is called a “correction in time” versus a “correction in price” and is often the precursor to a strong resumption of the last move direction, in this case an up move from the 7 area to the current 11-12 area.

What would I suggest? Well, a buy in here using no more that 5-7% of your portfolio cash for stocks would not be a bad move, as I see it. There is support at 8 ½-9, if we did see a down move, but the upside looks like the 16-17 area (once we cross up the Keyline). If we were to move above this near term 16-17 resistance level, the next price target is probably 20 or so. I would speculate that might take a number of months to accomplish, if it all comes to pass.

Well, that’s all for today. But the news is tremendous!! An ALL-IN BUY signal from the Super Chart is a momentous occasion. How momentous? Well, since 1965, there have only been 9 BUY signals – just 9!! And all of them have resulted in profits, from a low profit in the 1969 signal of +8.6% to a high of 311.7% profit in the 1991 signal that lasted until the year 2000! And, just to be fair, remember, that past performance does not predict or assure future performance. But, I am impressed by the Super Chart record to date.

So, do hope your week’s investing activity is a good one. In the meantime, you keep in touch. I do! See you next week..

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