Munchin’ on the numbers – by Max Whitmore

12-21-09

MUNCHIN’ ON THE NUMBERS

If you read the Weekly Keyline Report today, you already know that this will be the only MUNCHIN’ report I will do this week. I will be going to my brother’s home in Louisville Ky. with my mom (yes, my mom who is a very spry 90) for the Christmas holiday.

But, before I leave, the news from the charts. Today was a positive for the markets, but a nosedive for the bonds. We are all the way down to my Keyline on the bond chart and that is a powerful vote by bond traders that they see higher interest rates soon. Of course, if you are retired, that is good news. Your bond investments have been worth very little the last 20 months or so. My bond Keyline is at 116 27/32 and the close today on the continuous contract is right at 116 27/32. If I were to guess, I would have to say that we will close below the Keyline in the next few days, barring some unexpected news that makes bonds a haven again.

The S&P and Nasdaq both did well today right from the bell. But, due to the Christmas season, volume was well below the norm. However, buyers did outnumber sellers and that is what counted at the end. Oil fell over $4, and the dollar continued its sharp climb of the last several weeks. It is still a long way from the Keyline at 79.83, but it has closed the spread a lot lately. If the carry traders have yet to finish their transition to the yen, we could see a serious try to cross up my Keyline. Who would have believed just 4-5 weeks ago! This move could also be forecasting a rise in interest rates, soon, as investors see better returns from holding the dollar. Remember, the bond market is one the Fed can only influence, not control.

Not a whole lot else to report today. Much of what happened had more to do with light volume, as I said, and year end portfolio balancing. Congress is pressing hard to get its Health Bill passed and I am watching to see if it has any potential effect on the day to day markets. So far, I must report, there is little that says investors are very concerned at this point. Even the increase of the U.S. debt limit by nearly $2 Trillion this week didn’t seem to disturb the markets. For the life of me, I can’t understand why the debt increase didn’t really knock the stock market. Well, maybe next month will bring us some answers on that. Why? The big guys are coming back!

So, until next Monday, please have a very Merry Christmas. Enjoy the family gatherings, the gathering of friends, and pray for those that don’t have a way of doing that this year. Until Monday, as always, I do hope your trading day was a profitable one. Will be back here Monday, the Good Lord willin’ and the creek don’t rise.

NEED SOMETHING TO TALK ABOUT TONIGHT?

SIX MAJOR IMPACTS ON THE MARKET TODAY

1. Minneapolis Fed reports seeing gradual recovery in 2010. Markets seemed to like that report.

2. In a bit of a strange move, the dollar gains on good economic news and so does the stock market.

3. Bond prices took a nosedive today as investors begin to smell recovery and higher interest rates.

4. Soaring dollar hits gold market. Gold markets closed below 1,100. I say buy on dips like this.

5. Weekend snow storms said to limit last minute Christmas shopping in east. Season sales may suffer.

6. China announced 2010 goal of 8% economic growth, with 11% goal in manufacturing key ingredient.

That last one about China is an eye opener, for sure. And with the Fed getting in on the upbeat forecast business, maybe investors have been right since March. But let’s see what next quarter brings before we get too excited. Buy gold. Buy gold. See you next Monday.

DAILY CHANGES WEEKLY

Closes as of Mon. 12-21-09 CHANGE (cash) KEYLINE# ABV/BLW

DOW INDU. 10,414.14 +85.25 points 9,844.26 ABV +559.88

S&P 1,114.05 +11.58 points 1,059.44 ABV +54.44

30 YR BONDS 116 23/32 -1 17/32 points 116 26/32 -0-

NASDAQ 2,237.66 +25.97 points 2088.39 ABV +149.27

GOLD $1,091.70 -$20.90 $928.45 ABV $163.25

OIL $73.35 -$4.40 $84.66 BLW $11.31

DOLLAR INDEX 78.06 +$.31 79.83 BLW 1.77

COPPER $3.1455 -$.0030 $2.653 ABV +.4925

DOW DAILY PRICE RANGE 128.25 points

S&P DAILY PRICE RANGE 9.9 points

EOD BOND YIELDS 90 DAY 0.77% 10 YR. 3.68% 30 YR. 4.53%

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

*The name Super Chart Keyline is a registered Trademark of Max Whitmore.