2-12-10
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 20% 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).
Last week, the rubber hit the road, as they say. I was, as you will recall from the 2-5-10 Weekly Keyline Report, looking at a possible break to the downside in the S&P. The last three weeks have clearly been ones that suggested that this might be the outcome. Well, it did not come to pass, as you know without me telling you. But, what has come to pass is the possibility that the Keyline might hold. Now, don’t take that as a final reading on my Keyline Chart below, but do take these conditions into account, as you study it.
First, when we broke the HEADLINE to the downside on the week of January 22, I was immediately concerned. Second, this break came about, as you recall, when the President attacked the banking system to place upon this sector a $90 billion “tax.” He said that they owed it to the public and the government for having saved their hide last year.
Third, it took about 3 milliseconds for investors to see through that fog to the reality that this tax was but the first salvo against the financial sector. And fourth, the drop in the S&P that week was big and the volume rose to new heights quickly, telling me that the selling was from the foundational investors, major funds of all types.
This was the first such wholesale selling by the funds and portended to me that this just might result in a break of the Keyline. Above you will note that I added a “Special Instruction” to the heading of my Keyline Report that week. It told you to at once to set stop loss prices on ALL your stock holdings, 12% from the last high on volatile stocks and 25% on the “Steady Eddies,” Wal-Mart, P&G, etc. types (since changed to 20%).
However, the action last week was a surprise to me. We were AT the Keyline to begin last week and the surprise is that we closed ABOVE it last Friday night. Does that mean we are out of the woods? No, not by a long shot. Let me repeat what I have said a number of times in the last three weeks. Until we can climb above the S&P 1100 level and close there on a Friday night, I firmly believe that the Keyline remains in jeopardy. It is a vote in our favor that the close was above the Keyline last Friday, but not decisive. That is why I have titled this Keyline Report “The Crucial Test Continues.” So, keep the stops in place (and use them if they are hit), keep your powder dry (refrain from any new investments, at the moment) and, just to be prepared, have some possible Buys in the hopper (just in case we do resume the rally that began last March 2009).
Now, let’s take a close look at the S&P Keyline Chart.
You can see that I have placed two red lines on the chart, one above and one below last Friday’s close. The 1040 level is the support we need to hold at all costs on a Friday close. It is key! The 1100 level is now the technical and psychological resistance that we must close above on a Friday night to have any hope of resuming the March 2009 rally move. Do note that Friday’s closing price (at 1075.51 Friday) was one that saw a “hook up” from the Keyline which was touched at the previous week’s Friday close. That could be important if we can get another week to do the same. Just one “hook up” in price is not enough.
I want to call your attention to the MOMENTUM SECTION for a moment, too. Note that the green line (fast sto) is rolling potentially to the upside (see red circle). Then, note that the black line (slow sto) is still at the 81.7 level. This is what I have described to you many times as the “classic rally setup” (very low fast sto with a high slow sto).
The key now is that the black line really needs to continue to hold above the 68-70 level while the green line begins an move upward and (preferably) crosses above the 50-55 level. That would signal an 80% likelihood that the rally is being reinstated. Obviously, I will be watching this closely for you. During the week, when needed, I will make an update for you on this setup. But, right now that is a very positive situation for the S&P. Let’s hope that it works to our desire for rally resumption.
We need to take a close look at the Bond chart now, too
First, note that the close on Friday at 117 9/32 remained ABOVE the Keyline at 116 17/32. Not a lot, that’s true, but above. That tells me that the Big Bond Guys are, at the moment, content that interest rates are not in danger of escalating due to inflation or other causes (international currency default in Greece, for example). Can that change. On a dime! But, the world’s bond investors are waiting to see, just like we are, whether the stock market will fail or resume its rally.
Note, also, the MOMENTUM SECTION of the bond chart. You can see that the green line (fast sto) has dropped to 38.7 from last week’s almost 49 reading. That tells me that, as long as the black line (slow sto) holds above the 45-50 area (closed Friday at 51.74) we are not likely to see any near term selloff of bonds. Let’s see what this week brings. Hummmmm.
THE REST OF THE STORY
GOLD last week rose over $25 and that does tell us that, even though the DOLLAR held its own, that Gold traders are very leery that the Dollar will continue its rise. But, the Dollar chart also tells me that the Dollar’s price is holding above its Keyline, so the potential for higher prices is stronger than its potential for lower price in the near term. One of them is wrong. We will just have to wait and see which one.
CRUDE OIL prices rose this week, as the mood on Wall Street shifted a bit from a potential for a major break down of the S&P and Dow, to one that said just maybe they won’t. Crude took that to mean better economic times soon and prices rose on that potential demand for more oil as things pick up. Are the Crude traders right? Can’t call that one any better than to say Crude remains in a trading range that, while it is getting long in the tooth, doesn’t say to me it is about to break away one way or the other. Stalemate.
COPPER did climb a quite respectable $0.35 and that does say that the hard commodity traders do see more inflation potential rising a bit. But, as I told you in Friday’s daily MUNCHIN’, it too is still in a trading range, albeit while still in the Hyper Rally mode. And until we see that range broken, it must be interpreted that these traders too are just treading water in that range for now.
THE BOTTOM LINE THIS WEEK
The S&P rose a tad, but the battle continues to see if we resume the rally or fail. And make no mistake here. The stakes are very big. We need to climb above the S&P 1100 level on a Friday close to resume the rally. So far, Bonds are not telling us that there is any clear potential that they see on the horizon for a break or a rally in the S&P or Dow. So, they will continue to tread water for the moment.
The rest of the indices we follow were all pretty much, with the exception of Gold, also treading water last week. What will this week bring? Tough call. We can still go either way, is the bottom line. But, the S&P MOMENTUM SECTION says maybe we will rally. I will be following that, as I told you, so keep close to the daily MUNCHIN’.
Just lots of potential action to come this week it appears. Likely to be quiet with President’s Day today, but tomorrow should see the full battle resume. As always, do hope you have a good investing week. And you keep in touch. I do! See you next week.
*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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