2-5-10
LOOK AT THE NEW KEYLINE FEATURES BELOW!
CURRENT BUY – 100% of portfolio 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 close below stops. If so, execute that exit the next day at the open. These instructions hold until we close above S&P 1160 (if we do).
I watched the trading on Friday with some fascination because it was the possible day that the important support at 1040 might be broken. And while we did come close intraday at 1044.50, the only number that finally counts to the Keyline on the weekly chart is the closing number. And at the end of the day, we didn’t break the Keyline.
But, as I watched closely, especially as we approached the 3 pm mark, there suddenly appeared a most unusual event. From out of “nowhere,” just as I was expecting to see more investors sell and exit the market, huge orders hit the “floor” and index prices began to rally sharply. As much as the day’s selling was a fascination, this was suddenly as much a fascination to watch, too. And before the final bell was sounded at the close, not only had the S&P climbed an incredible 22 points, the Dow, trading as low as 9875 at about the 3 pm mark, climbed an incredible 140 points and closed just above its all–important 10,000 mark.
Now I do believe in the tooth fairy and Peter Pan (if I didn’t my grandkids would have my hide!), but even for me it is impossible to believe that mature, sophisticated investors looking the market in the face just as we go into a weekend where anything can happen in Europe — where the possibility of sovereign defaults are so potentially near — suddenly said this is the best buy point in a long time – BUY! No, not on their most mentally confused day would that happen.
So, let me tell you a short story, one I personally lived. It was October 1987, October 19th to be exact. It was called Black Monday later, after the Black Tuesday in 1929. It is near the close of the day and I am in my wife’s brokerage office (Yes, she was a stock broker then, and a really good one!) and ten or so of us were watching the monitors (yes, there were some in those days, too) as the Dow dropped over 500 points!! We left that day in a daze. None of us believed what had happened. It just couldn’t be 500 points down in one day!!
Well, it was true and the brokerage business was never the same after that day. Her broker went belly up in a month and she left the business. And that closing was but one of thousands across the country of small local brokers. Even some of the big houses just disappeared.
Then, a strange thing happened. It was the week of December 4, 1987. Everyone was still reeling from the October crash, but for some reason that week the Dow climbed over 160 points! At first, we all just thought it was a reaction rally that would fade quickly. But, it didn’t. Huge sums of money flooded the market from – well, somewhere. From that week on, the Dow never looked back. It just kept climbing! True, there were several dips from there until the crash of 2000-2003, but the Dow never fell again like it had on that October day in 1987.
Richard Russell penned the name for that event in 1989 when he wrote a column much as I am writing mine today. He said he had no proof, and likely never would have, but his long experience told him the December 1987 turnaround was NOT an investor led rally, at its beginning. He opined that it was government intervention aimed at stabilizing the stock markets. He even opined that the then Fed Chairman Allan Greenspan might be behind it. He called it the “Plunge Protection Team.” Their purpose, he suggested, was to stop the kind of nosedive the markets saw in the 1929 and 1987 October crashes.
Well, no one has ever proven that theory, of course, and the government (while it does openly intervene in the currency markets) has never said word one in answer to Mr. Russell’s column. But, all the guys like me that watch and write on the markets see it every now and then. The last time I saw it was in 2003, again in October when the drop from 2000 just suddenly stopped. I remember it well. It was one morning when the markets were starting down again after 4 weeks of nosedive and suddenly, “out of the blue” within 2 hours the S&P climbed straight up over 27 points!! That was incredible. But, the next day the same thing. It wasn’t hard for all of us professionals to see the handprint of the PPT (as we now call it).
In my opinion, Last Friday was the PPT in action, once more. After all these years they are still there. Will it ever be proven? I doubt it. Will the March 2009 reversal ever be proven to be a PPT led move? I doubt it. Is there really a PPT? We likely will never know. But, let me tell you. This writer knows it is true right down to the marrow of his bones. Yes, Virginia, there is a PPT.
OK, that said. Let’s get to the S&P Chart
We did close just a hair above the Keyline Friday at 1066.19. The Keyline is at 1060.43. I do note that the MOMENTUM SECTION green line (fast sto) is quite low at 28 and the black line (slow sto) is quite high at 87. This is a classic rally setup – maybe thanks to the PPT? Anyway, unless things change during the next day or so –- meaning that the supports don’t break -– I look for some buying to come in or at least that we hold the current area for a bit. For in spite of the Friday scare, we are still above the Keyline and the important 1040 S&P support. Still above.
I learned a long time ago that anything can happen in the stock market. So, I remain cautious and again repeat my instructions to you to keep your stops active! But, as long as we remain above the Keyline, we watch and hold our current BUY mode condition. As events unfold this week, I will keep you up to date via the MUNCHIN’
OK, on to the Bond chart.
We remain above the Keyline, currently at 116 16/32, in fact well above it, closing Friday at 119 8/32. We have been above the Keyline now for four weekly Friday closes. In that time, the dollar has rallied above its Keyline, also. What does this tell us? It says that as the stock market has softened, investors have sold fast and heavy. Further, that sale money has needed a place to go that might be called “safe.” I call it a “safe haven” rally in the bond and dollar markets and I expect that, until we seem to be clearly back in the rally mode, it will continue. So, for now, I am cautious and would not be a bond or dollar buyer.
I do note that the MOMENTUM SECTION shows both the green and black lines (fast and slow sto) at only the 50 area. This can mean that we either have a lot of room to climb, or drop, in price. Frankly, that is not a good picture. It means that the “Big Bond Guys” are not sure about this market, either. So, I go slow in here. Let’s just watch. When the Big Bond Guys aren’t sure, we better be very, very cautious.
THE BOTTOM LINE THIS WEEK
I will be covering the Copper, Dollar, Gold, and Crude Oil during the week. Not really much to add today to any of those in this Keyline Report, so watch for their charts and my comments on Wednesday (Gold-Dollar) and Friday (Crude – Copper).
As for the Stock market, we will need to watch very cautiously this week. Not a lot of heavy duty economic reports out this week, except Retail Sales and the Michigan Consumer Sentiment late in the week. So, most of this week will be market driven, meaning that investors will be digesting the past earnings reports and watching the developments in Europe.
Will there be any sovereign defaults in Europe? Will it be Greece, Portugal, Spain, Ireland? My best advise it watch the Euro. If it continues to fall and the dollar continues to rise, the possibility of default grows. And if default does happen, this market is in for a pretty choppy ride. But, let’s not get ahead of ourselves. In this humble analyst’s opinion, we are NOT watching “normal” market action in here. Let’s just remain very, very alert.
So, until next week, do hope you have a good investing week. And, as always, you keep in touch. I do! See you next week.
WHITMORE DOW STOCKS KEYLINE DATA
6 MO. TOP 5 SECTOR STOCKS ABOVE THEIR KEYLINE
(RANDOMLY SELECTED**)
*The name Super Chart Keyline is a registered Trademark of Max Whitmore.
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, all of his associates and affiliates and all of the Reports he authors or approves in any way. All material herein is Copyright 2010 by Max Whitmore. All rights reserved.
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