Munchin’ On The Numbers – An Icon Predicts Historically Low DOW

1-29-10

CURRENT BUY – 100% of stock allocation $$$
KEYLINE 7-25-09 BUY 50% allocation only (S&P @ 970)
SIGNAL 10-9-09 BUY balance of 50% (S&P @ 1071)

1-25-10 SPECIAL INSTRUCTIONS ALL SUBSCRIBERS:

Establish stops on volatile stocks 12% below highest high last six months.
Use 25% stop for “Steady Eddie” stocks. Check each day to see if any close
below stop. If so, execute that exit the next day, at the open. These
instructions hold until we close above S&P 1160 (if we do).

COPPER AND CRUDE OIL

The most interesting development in Copper is that as of today the chart broke its second support in the last month. No big deal, however as this correction, so far, is still in the Hyper rally area, well above both the Keyline (at 2.7148) and the Cap line (at 2.8141). But, to me the most important feature of the chart is what I call the “classic” rally setup in the MOMENTUM SECTION. Note that the green line (fast sto) is now at 32.29 (see red circle)

Also note that the black line (slow sto) is holding at 88.34. This “setup,” as I call it, of a very high slow sto and a low fast sto, when you are in a Hyper-rally Mode, 80% of the time leads to a resumption of the rally. Will it here? Well, the odds are for us and, unless some unexpected event occurs, I suspect that the rally will resume. All in all this is a pretty good chart and in a BUY setup for now.

Also, the new support is now 2.7000 and the resistance is now what was the old support at 3.1000. Breaking up through the old support again would be very bullish. Final note: look at the orange vertical line I have drawn on the chart. This occurred in late August and is a setup almost exactly like the one we have now. As I say, unless an unexpected event, it will likely repeat.

The Crude Oil chart is just the opposite from the Copper. It has been a long time since Crude has been above it Keyline, actually since the commodity crash of 2008 (crossed down the Keyline in September 2008). There have been two attempts to move back above the Keyline, but both have failed, the last attempt in just the last three weeks. We are very close to the current support at $71.50 a barrel.

But, also note, that the green line (fast sto) in the MOMENTUM SECTION is getting low, currently reading 27.50. While the black line (slow sto) is not as high as a reading for the Copper, it is just enough to maybe see some leveling out in the Crude prices near term. Maybe next week will help clear that up. For now, however, until we see prices steady out, just be cautious regarding the Crude’s ability to hold its current support.

THE BOTTOM LINE

I don’t usually do this in a daily MUNCHIN (typically I put this in a Weekly Keyline Report), but the granddaddy of all financial newsletter writers, Richard Russell wrote a blockbuster daily blog yesterday!!! I don’t have his permission to make a direct quote, so I will have to paraphrase. He basically said that what he sees going on today is the beginnings of the failure of the rally that has lasted nine months. He goes on to say, citing for the first time in many months the DOW 50% Principle I referred to in my last Weekly Keyline Report, that since the rally stopped at the 50% retracement line (at DOW 10,725) and is now weakening, it is quite possible that we will now drop down to test the old lows we had last March!! He goes on to say that he believes that these supports will break and that the DOW has a possibility to actually fall to as low as 4500 first and even as low ultimately as 1,000. Folks, that is 90% below where today’s DOW prices trad!!

Is he right? Lord knows. But, knowing he is a very conservative writer, some say too much so, to hear him make such a statement made me sit up, for sure. I will have a deeper look at all this in the Weekly Keyline Report on Monday. But, folks, you do not want to ignore this guy as a nut. He has been in this business too long. I graduated from high school the year he began writing. He has the largest group of “big money” subscribers in the business. And he has seldom been wrong in his 50+ years once he makes a big statement. Do NOT miss my Weekly Keyline Report!

But, this I want to reiterate! Do NOT procrastinate!! Absolutely, set stops set ON ALL YOUR HOLDINGS AND USE THEM as I have outlined above. This market should still go to 1220-40 S&P, but it might not, too. If this market drops, it will be a hard one and quick. So, if you are losing sleep as we confront this serious test, sell off parts of your portfolio until you do sleep well. And maybe moving from a 25% stop level on your “Steady Eddie’s” to a 20% level would be a sound step, also. Ending the day almost at the S&P support tells us that this is a very important moment in this market.

Well, all that’s a real mouthful for one day, so I’ll sign off for now. Will have important charts Monday, so, again, don’t miss the Keyline Report. And as always, do hope your trading day was a profitable one. Will see you Monday, Lord willin’ and the creek don’t rise.

NEED SOMETHING TO TALK ABOUT TONIGHT?

SIX STORIES IMPACTING THE MARKET TODAY

1. The S&P is almost down ON its support. This is a very serious test of whether we go higher!
2. Dollar and Bonds rise fast as market sells off. Investors running to a money haven is not a good sign.
3. Even great GDP, well above expectation didn’t move market higher. Investors just don’t believe them.
4. Consumer sentiment (U of Mich) and Chicago PMI come in well above estimates. S&P nosedives!
5. Bill & Melissa Gates pledge $10 billion (that’s a B) to help develop vaccines. Huge impact here!
6. Finally, Administration look sat other venues for the 9/11 trials. Where were their heads to start with??

MY TAKE: #6 should have been done weeks ago. But, #1 is the most important financial news of the month! #5 is a welcome help to the medical community and shows the power of the private sector. #3 says that reports are not the problem. Lagging employment is!! And #2 tells us how fear drives this market as we come into a Friday. Nobody want to be in over the weekend.

Note: All closes at 4pm using continuous cash contract results

Disclaimer

** The top five sector stocks shown are stocks that are above their Super Chart Keyline and between $5 and $35 in price have been randomly selected from the stocks in the each sector. Their inclusion in the Report is not to be interpreted as a buy recommendation nor is the exclusion of others above their Super Chart Keyline to be interpreted as a sell recommendation. This data is given for informational and research purposes only, as we do not make buy or sell recommendations at any time under any circumstances.
?***Max Whitmore, “The Keyline Report”, and “MUNCHIN’ On the Number”report does not endorse or suggest any of the securities which are mentioned in any way in its Reports. They are provided purely for informational and research purposes only. Max Whitmore, “The Keyline Report,” and “MUNCHIN’ On the Number” do not recommend particular securities to anyone, ever, under any circumstances. The statements made herein include information obtained from sources we believe to be reliable, but no independent verification has been made and we do not guarantee its accuracy or completeness in any manner whatsoever. You should not make any investment decisions of any sort based solely on what you read in the Keyline or MUNCHIN’ Reports. The statements made herein contain general information and do not constitute an offer to buy or sell any security of any description. Subscription to any of the Reports mentioned above is consent by the subscriber of full release of Max Whitmore and the Reports mentioned herein from any claims or actions of any description, legal or otherwise, against Max Whitmore or the Reports. All material herein is Copyright 2010 by Max Whitmore. All rights reserved.

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