The KeyLine Report – by Max Whitmore
MERRY CHRISTMAS EVERYONE!
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)
Well, Christmas is upon us. Not much to report here in Columbus, Ohio when you look for snow, but the kids are all having fun, anyway. But, for this guy, it is really hard to realize that the year 2009 is on its last few days! Where did it go? Well, for those of you that are my older generation readers, you know. And for the rest of you, well, the day will come when you will wonder the same thing. For now, just enjoy the fact you don’t have to think on such things!
If you have been reading the daily MUNCHIN’ Report, you know that the markets have been a bit more active that I usually see the Christmas holiday bring. But, most of that I still attribute to the times we are in. I told you in the Tuesday MUNCHIN’ that the exact reasons are not very obvious, but that the fears this year are quite different than in Christmas’ of the past 10 years or so. This time, jobs, tight money, and just plain uncertainty about a lot of political questions are weighing on the minds of many investors. Which ones are the strongest, as I said, I just haven’t a clue. But, the pressure is there.
THE MAJOR KEYLINE CHARTS
Moving on to the charts this week, I included the S&P Keyline Chart last week and I am including it again this week, as we closed Friday on the Headline, in fact a tad below it. I don’t give that tad a lot of weight, however, and will just settle by calling it as closing on the Headline. While it is no big deal (yet), it is a concern that has me watching this chart quite closely. I will be giving you a MUNCHIN’ report tonight (12-21) and update what I see, but I will be out of town for the rest of the Christmas week, so it will be next Monday (12-19) before the next report update on this matter. That is, of course, unless the market’s fall apart during the week, in which case, look for a special report. But, I don’t see that happening, at the moment.
Note, also, on the S&P chart that the MOMENTUM SECTION green line (fast stochastic) turned down for the week. I mentioned this last Wednesday in the MUNCHIN’ and the outlook from such a move remains. I look for the green line to move lower, say into the 40-60 area, and hope that as it does the S&P price move is minimal or nothing. This would mean that the MOMENTUM SECTION correction was a prelude to some higher prices. If prices drop along with the green line, well, then I may not be such a happy camper. With a quiet week (hopefully), the former will be the chart action
I am also including the 30 yr Bond Chart for your review. You can’t see the Keyline number here, but it stands at 116 27/32. The action in bonds has been of concern to me for several weeks, as I told you last week in several of the MUNCHIN’s. For the last several years, prices have held pretty much above the Keyline, Earlier this year we touched it, true, but the general action has been all above the Keyline. You will note that once in 2006 and in 2009, we dipped below the Keyline. But, in both cases, in relatively short order, moved back above the Keyline. That occurred in very difficult market activity (remember?), but that seems behind us now (I hope). And you have seen the chart’s huge spike in late 2008 before, and by now know from my earlier remarks, that it was all due to money seeking a haven in the crash of October 2008.
I point out this historic stuff because, right now, my main bond chart concern is that a move below the Keyline could also be followed quickly by a rise in interest rates, as occurred in the last several cross downs of the Keyline. That seemed somewhat blunted by the FOMC written report some days ago, but the bond market is one market that the Fed can’t control. The bond market is just too big. So, if bond traders begin to sense that the Fed will be backed into a corner and be forced to raise rates sooner rather than later, that could be what a Keyline cross down could be telling us. It would also portend a sell off by the stock markets. So, I will be watching all of this for you very closely.
THE REST OF THE STORY
The dollar, also responding to the recent FOMC report, gained last week. Investors are moving away from the dollar to the yen to continue their carry trade activities, as I told you last week. They continue to figure that our interest rates are going up soon and the yen will much more than likely continue to have very low rates. For the carry trade that means move to the yen. With this move, expect that the dollar will continue to see moderate strength for the next month or two. (Note that such an attitude could carry over into the Bond market rather easily, too – yet another reason to watch it closely).
Gold (see the chart in last week’s Weekly Keyline Report) was telling a story of its own, in response to the dollar action. These two tend to move in opposite directions from each other, something I have often remarked upon in this Report. The gold market was due for a correction (I mentioned this to you three weeks or so ago) and it has occurred. But, it has pretty much held in the key support area of $1,100 an ounce. That is good action. I would tell you to continue to be a gold buyer on any dips like this and that my long term outlook for the price of gold has not changed. It is going higher – much higher.
As for Dr. Copper, our surrogate for the inflation index rose again last week, not so good news for those on a fixed income. It has now more than doubled since the first of this year. I am sure you notice it at the grocery store, by this time. Gas prices are less prone to the hit, but even there, prices have moved higher. A side note. You might want to look up on Google or some other browser the rumors that the oil producing countries may try to create a currency of their own that they would issue and would be the only currency they would accept from those that buy its oil. This is not a massive movement by them at this point, but the talk is getting louder. This would not be good for the oil poor nations, at all. I will be talking more about this over the next number of months, but you need to be aware of it now.
THE BOTTOM LINE THIS WEEK
Well, that about all this week. But, before I go, let me give you a quick view of my Bottom Line for this week. I expect that the S&P will trade in a relatively narrow range, but hold the 1,080 key support. I look for the Dow to also hold its current area, but the Nasdaq might work a bit higher on the strength that continues to be developing in the Tech Sector. (You can see the Top 10 Sector report below for the best performers the last six months.) As for the Bonds, I expect to see a possible test of the Keyline this week, but unless some very unexpected news hits, the support in the 117 area should hold. Gold and the dollar will likely be pretty steady until after the New Year, meaning that the oil per barrel price will likely hold in the $72-77 range with no major news to drive it higher (or lower, for that matter). And I expect that copper will inch a bit higher. But, until we get a better picture of the bonds, there will not be any major move here.
To repeat, I will have only one MUNCHIN’ Report his week. That will be tonight and then I will resume the Weekly Keyline Report and the daily MUNCHIN reports’ next Monday (12-28). So, until then, as always, do have a good investing week. And you keep in touch. I do! See you next week.
WEEKLY CHANGES
Closes as of Fri. 12-18-09 WK. CHANGE (cash) KEYLINE# ABV/BLW
DOW INDU. 10,328.89 -142.61 points 9,848 ABV +484.27
S&P 1,102.47 -4.30 points 1,059 ABV +43.03
NASDAQ 2,211.69 +21.38 points 1,969 ABV +126.48
30 YR BONDS 118 8/32 +20/32nds 115 24/32 ABV +25/32
GOLD $1,112.60 -$19.90 $1,044.40 ABV +$183.94
OIL $74.25 +4.69 $83.21 BLW -$10.42
DOLLAR INDEX 77.75 +1.18 79.03 BLW -$2.08
COPPER $3.1425 +$.0095 $2.8808 ABV +.4895
TOP 10 STOCK SECTORS LAST 6 MONTHS @ 12-18-09 LAST WEEK%
1. TOOLS (+67.0%) #2 LAST WEEK UP 65.0%
2. APPLIANCES (+64.3%) NEW TO LIST NEW NEW
3. BROADCAST (+63.8%) #1 LAST WEEK DOWN 70.3%
4. PRINTING (+58.3%) #6 LAST WEEK UP 42.5%
5. AUTO (+57.0%) #3 LAST WEEK DOWN 49.0%
6. ELECTRICAL (+53.0%) #4 LAST WEEK DOWN 48.0%
7. ENGINES (+48.4%) #5 LAST WEEK DOWN 43.4%
8. MINING (+47.0%) SAME AS LAST WEEK SAME 38.6%
9. TEXTILE (+46.0%) #7 LAST WEEK DOWN 41.1%
10. CHEMICAL (+42.9%) SAME AS LAST WEEK SAME 34.4%
*The name Super Chart Keyline is a registered Trademark of Max Whitmore.
