Is This More Than a Bump? Latest Super Chart
Posted @ 10:41 am - Filed under Economy, Max Whitmore
Well, it has been a bit bumpy hasn’t it! The action last Thursday and Friday was a real rollercoaster, action like I have not seen for many months. But, it is likely that this current test of the market’s supports will, when all is said and done, point the market’s direction for the next 3-6 months.
Why, you ask? Well, two rare Super Chart events occurred last Friday. First, after we crossed up the Super Chart Keyline only several weeks ago, we crossed below it again as of last Friday (see red box on the Super Chart below). That has only happened three times since 1965 (when the Super Chart data begins), once in 1968, 1972 and 1975. In each case, the close stayed below the Keyline for 3-4 weeks and then crossed back up to continue its rally move and generate a profit for the system.
But, my many years experience with the Super Chart tells me that this time we are looking at a very unusual event here. In all the other three instances, prices held above the Keyline for much longer periods before crossing down. In 1965 and 1968 they held above for over a year. The 1975 event held above 4 months before it crossed down. This cross down took just two weeks. Am I concerned? Yes. Will I be watching like a hawk? You bet!
The Keyline closed yesterday (11-2) at 1061.12. It’s reading is blocked by the Monday night close price indicator at about 1043, so I wanted you to know the exact Monday night Keyline reading. To generate a Super Chart sell signal, closing prices must (1) stay below the Keyline 6 weeks consecutively or (2) cross below the 5% loss level on a close –- the Super Chart is designed to help keep losses to this area if some unusual major market reversal occurs. Now, if either event occurs, we go to cash for all funds that are in stocks. And remember, the Super Chart is a weekly chart, so only Friday night closes are used to make a dot on the chart that triggers any action.
If we do generate a Sell signal by being below the Keyline six consecutive weeks before the 5% loss signal occurs, it will be the first time such an event has occurred so quickly after the Buy signal, measuring from a true Buy signal to a true Sell signal. The shortest such period for the 45 year history of my Super Chart data was 23 months in 1975-1977.
The second important event, also occurring last Friday, was the crossing down of the “neckline” on the Super Chart. I told you that if this occurs AND we see a continuation of the down move to support in the low 1000 S&P area, the news would likely not be good. But, we have not yet seen that occur, so far. So, while this remains a very serious test of the rally since March’s lows and a serious matter in terms of portfolio risk, let us watch and see what the Super Chart tells us.
For the record, we entered 50% of our stock allocated portfolio funds back on July 25th at S&P 970 and the balance three weeks ago, at S&P 1070. The July entries are still well above water, but some of your recent additions may be under water. Currently, the 5% loss level is in the S&P 1000 area. Thus, if you see the 1010 area on a Friday close, expect that I will be posting a special alert for you to read. When the subscription web site is up and running, you will not need to check the site, I will send you a Direct Alert e-mail. For now, check this web site for any special alerts.
Some of you may want me to comment on what fundamentals are putting this market to the test. Well, as I so often say, fundamentals are not how I arrive at my analysis, but I do observe them. So, I would say there are a number of important ones with much influence right now; (1) the off-year election today (if heavily against the Dems, it could bring big money into this market); (2) many banks continue to struggle with balanced sheet problems; (3) real estate continues to weigh on the markets, residential and commercial now; (4) what the consumer will do is not all that clear to most business investors; (5) and some of the technical market internals are weak – i. e. many stocks are falling below their 50 day moving averages and on sell days, volume has been high (bearish indicators). I am sure there are other points lending their weight, but these are the ones that stand out to my thought for now. Again, for me the summation of all of them shows on the Super Chart as weakness that needs our close attention.
In closing, with all this information to draw upon for analysis, I believe that I can say this with a reasonable level of certainty — that if a Sell signal is generated by the six week method (not the 5% loss method) the power of this reversal could very likely see us testing the old March lows. Let us hope that will not be the case. I believe that if the power of this down move is strong enough to send us back to cash so soon, the lows we experienced in March will be tested and will, I believe, not hold, putting this market in very serious trouble. But, let us not get ahead of ourselves.
As I am writing this Monday night after returning from a business trip, I do have an added comment advantage that I seldom have, I can write the column with one day of the current week already in the bag. From what it shows, we are still not seeing any strength that would tell me we will quickly resume the rally move. And remember, we should stay above the S&P cash index 1000 area. So, let’s see what the week brings.
These are “times that try men’s souls,” as Thomas Paine said in his writing Common Sense in 1776 (should add women’s souls these days, too). The testing going on right now will have huge implications for our and the world’s economies. Be assured, as I said earlier, I’ll stay right on top of it for you. For now, let’s just sit tight.
And as always, I do hope you have a good investment week (what is left of it). In the meantime you keep in touch. I do! See you next week.
This entry was posted on Tuesday, November 3rd, 2009 at 10:41 am and is filed under Economy, Max Whitmore. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.
