My Best Advice Is…

Posted @ 11:29 am - Filed under Economy, Max Whitmore

Looks like the ride will stay a bit wild for a bit longer! Last week, we saw some pretty sharp moves as the FOMC and the October employment numbers provided just about all the markets could stand of tension and anxiety. If you were wondering just what to do in all of it, I do hope you took the advice I gave last week and sat tight!

One of the tough parts of being a chartist is not listening to all the tons and tons of words that tell you to run, hide, capitulate, and prepare for the worst. It took me years of patience and my great mentor to learn this discipline. So, if it all kept you on edge, don’t feel bad. But, the single most important thing I can repeat and repeat to you is this. Until The Super Chart Keyline is crossed down for six weeks in a row (on a Friday close) or we cross down for two weeks in a row below the key supports which I describe to you each week, just sit tight.

Just a brief example of what I mean will help you better understand this. A very good friend, George is his name, sent me a recorded message he received from an analyst that even raised the hair on the back of my neck. It was about seven minutes long and delivered in a very somber, almost frightening tone. The analyst said that all his clients were to prepare for what I could only call the Apocalypse. He didn’t use that word, but he told of a huge drop coming in the market, that all his signals but one were now in place and that when that one hits – and he expected in very, very soon – the world, yes he said the world, was about to fall off the edge of the cliff. (Do the names Elliott Janeway or Robert Prechter come to mind?)

Now, if I was the average investor paying this fellow for his subscription, I would have been frozen in my seat. I do suspect that I might just have thrown the towel in and ran for the hills. The recording’s final summary said that the dollar was about to dive to incredible depths, the stock market to new multi-year lows, and that when the last signal fell into place, he would have a very important set of moves that would save at least his subscribers.

Now, I detailed all this to make a point. The stock market is not about what might happen. The stock market, if you are an investor, is all about what ACTUALLY has happened. The one and only thing that is important to your portfolio is what has actually happened! Once you know this, then you can take steps to protect your portfolio values. But to always be taking steps in anticipation of a coming crash or to lose sleep over what MIGHT happen is to truly live life on the worried edge ALL THE TIME! Not for me, thanks. Now, understand, it is not that I won’t listen if the chart says prepare for a problem. I did just that on August 29, 2008 at Dow 12,300 — when I wrote and told my subscribers that I saw 8,000 Dow coming in 30-90 days and to prepare for a huge downdraft. Or in May 2008 when I told my subscribers to get out of commodities, a huge fall was coming. It did in July. But the chart forecast those events, not my fears. Let the chart tell you what to do! And unless you are an advanced chartist, that is the job you pay me to do. Believe me, I will always do my very best to deserve your trust in that area.

So, with that off my chest, just what happened last week and what should you do this week? First off, the market held its key supports all week, though the souls of many men and women were truly tried to the Nth degree! On Monday (11-2) we hit the lowest price of the week at 1029 S&P cash index, just 20 points from the top of our key support area. But, by the end of the day Wednesday, after the FOMC (Federal Open Market Committee) report, the close was well above this area at 1046. I felt that at that point, even a bad employment report on Friday would not break our support area.

And true to form, the charts climbed to the close on Friday of 1069, 40 points above the weeks low, nearly 4%. What does this mean? Simply, that for the moment, the market does NOT see an Apocalypse about to occur. Can we still fail and this market go to new lows? Of course it can. Mr. Market, as Richard Russell calls it so often, can do whatever he wants or feels needs to be done.

But, I want to repeat what Mr. Market has clearly said to us as of last July 25th. The target for this market, predicted by a very clear UP head and shoulders formation, is 1220-1260. Until we break support at about 990-1010 on the S&P cash index, expect nothing else. We crossed up the Super Chart Keyline on October 9th, crossed below the Super Chart Keyline on October 30th and last Friday (11-6) again closed (at 1069 S&P) above the Super Chart Keyline which now stands at 1061. We also closed below the head and shoulders “headline” on October 30th (see last week’s report), but closed above it last Friday. So far, so good.

So, the answer to your most important question of the moment – What now? — is just sit tight. If you still have some stocks that you want to buy, using money that is the portion of your portfolio designated for stock purchases (you do have your portfolio designated into investment types, don’t you?), you can still be investing at prices you like. We are still over 160 points from 1220 S&P and reaching that area should help your portfolio grow handsomely, assuming your choices are well chosen (I would, however, suggest you keep them in the top ten performing sectors I detailed in my report of October 12 – see the archives here).

Now, there is one other influence on the market I need to address before we close. The House of Representatives passed, by a slim 5 votes, a version of a “reform” health bill. You will read this week of the influence that this will have on the market and how it will (1) destroy it; (2) send it to the moon; or (3) some combination of these two.

Here is my advice. Forget that bill and its potential effect on the market, for now. Keep your eyes peeled on support at 990-1010 S&P. So long as you don’t hear from me via a special report (yes, if we close at 1020 or lower S&P cash index, check back here pronto for special instructions), just keep about your normal investing business.

This bill’s financial effect on the market will not occur until “Mr. Market” sees on the horizon proof that the bill is about to suck money out of the market and send it tumbling. When will that be? I haven’t a clue. But for right now, there is nothing on the horizon that is warning that such an event is about to occur. Mr. Market looks out from 2 to 12 months when he invests and right now, I emphasize right now, he sees nothing that disturbs him. When he does, we will know it well enough in advance to take protective steps. True, we may not get out at the exact top or in at the exact bottom, but we will go home most often with the 80% in-between.

By now, you have noticed that this week’s report has been more about how not to get upset by all the pronouncements that are sure to come your way the next month or two. But, the reason for that is that until The Super Chart Keyline says there is a change, there is not a whole lot more for you to be made aware of right now.

But, before I close, I do want to include a chart from the Oil & Gas sector, one of the top 10 performers in the last 6 months (again see my 10-9 report). This sector has taken a lot of beating as natural gas prices have fallen recently, but I have noted that the stock Key Energy Services Inc. (KEG) has followed quite closely the S&P Super Chart Keyline action.

It bottomed when the Super Chart did. It rallied when the Super Chart did. And it crossed above the Keyline when the Super Chart Keyline did. It has been a good “clone,” you might say.

There is also a small head and shoulders here (see chart) that says if prices hold the $6-6 ½ price level, it could go to about $11 or so, about a $3 gain from Friday’s close of $7.70 (about a 40% gain potential). It looks like a low priced and reasonable risk for your aggressive stock trades. So, I included it in this week’s report. Just remember that it seems to follow the S&P cash index quite closely and if that fails, be alerted to exit this one at 6 ½ or so.

Well, that’s it for this week. Remember the message for today: Keep your eyes on the charts. Let them tell you what to do. Right now, sit tight and expect that unless supports break, the target is S&P 1220-1260 (that would be in the mid-11,000 Dow Industrials area. When will we get there? I still look for mid-to-late first quarter, assuming support holds. And your ears? Well, just keep your ears tuned to some good music –- might I suggest Paul Potts latest album Passione.

As always, do 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.

This entry was posted on Monday, November 9th, 2009 at 11:29 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.