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NBER Declares the Recession is Over

Stock-Markets / Stock Markets 2010 Sep 21, 2010 - 08:45 AM GMT

By: Mark_McMillan


Best Financial Markets Analysis ArticleThe NBER declared that the recession ended in June 2009, more than one year ago and apparently the market liked that...

Recommendation: Take no action.

Daily Trend Indications:

- Positions indicated as Green are Long positions and those indicated as Red are short positions.

- The State of the Market is used to determine how you should trade. A trending market can ignore support and resistance levels and maintain its direction longer than most traders think it will.

- The BIAS is used to determine how aggressive or defensive you should be with a position. If the BIAS is Bullish but the market is in a Trading state, you might enter a short trade to take advantage of a reversal off of resistance. The BIAS tells you to exit that trade on "weaker" signals than you might otherwise trade on as the market is predisposed to move in the direction of BIAS.

- At Risk is generally neutral represented by "-". When it is "Bullish" or "Bearish" it warns of a potential change in the BIAS.

- The Moving Averages are noted as they are important signposts used by the Chartists community in determining the relative health of the markets.

Current ETF positions are:

Long at DIA $102.80
Long QQQQ at $44.76

We are long Oct $106 DIA puts at $185 per contract ($1.85 per share) on Friday, Sept 17th. We are long Oct $48 QQQQ puts at $94 per contract ($0.94 per share) on Friday, Sept 17th. We are long Oct $113 SPY puts at $231 per contract ($2.31 per share) on Friday, Sept 17th.

Daily Trading Action

The major index ETFs opened higher and immediately raced upward and continued to move higher until late morning when a modest slide began which most of the lunch hour. Shortly before 1:00pm, the move higher began anew and it didn't slow down until the final five minutes of trading saw much of the gains made in the final hour given back. The major indexes gained from 1.4% to 1.7% on a each. The Russell-2000 (IWM 67.02 +1.81) 5.21 +0.27) with small caps gaining 2.8% on the day! The Semiconductor Index (SOX 336.12 +1.77) gained just over one half of one percent which suggests a lack of leadership from an index that should be leading a real bullish rally. The Bank Index (KBE 23.76 +0.53) gained more than two percent and the Regional Bank Index (KRE 23.02 +0.63) gained most of three percent as both finally closed back above their 50-Day Moving Averages (DMAs). Both bank indexes remain in trading states with BEARISH BIAS but that may be changing by the end of the week. The 20+ Yr Bonds (TLT 102.26 +0.59) gained a bit more than one half of one percent rallying up to a short term downtrend line and suggesting that not all investors are buying into the rally in equities. Volume was lacking for TLT trading, however. NYSE volume was around average with 954MB shares traded. NASDAQ volume slipped back down to average with 1.984BB shares traded.

There was a single economic report of interest released:

  • NAHB Market Index (Sep) came in at 13 versus an expected 14

The National Association of Home Builders report was released a half hour into the session and had no discernable effect on trading. Homebuilders lack confidence in the market for new homes but this was already priced into the market.

All ten sectors in the S&P-500 showed gains led by Financials (+2.0%). The key thing to watch on Tuesday will be the reaction to the Fed release of its policy statement when it announces its interest rate policy at 2:15pm EDT. This has the ability to move the market and could cause us to alter our positions.

Implied volatility for the S&P-500 (VIX 21.50 -0.51) fell more than two percent as the S&P-500 was posted a one and a half percent gain. Implied volatility for the NASDAQ-100 (VXN 22.43 +0.17) rose as the NASDAQ-100 was lifted. This is important to note as normal behavior sees implied volatility decline when the underlying index rises.

The yield for the 10-year note fell four basis points to close at 2.71. The price of the near term futures contract for a barrel of crude oil rose $1.20 to close at $74.86.

Market internals were positive with advancers leading decliners 4:1 on the NYSE and by nearly 4:1 on the NASDAQ. Up volume led down volume 13:1 on the NYSE and by nearly 5:1 on the NASDAQ. The index put/call ratio fell 0.05to close at 1.46. The equity put/call ratio fell 0.10 to close at 0.48.


Monday's trading saw significant gains as all the major indexes broke out and above of their trading ranges. Volume on the exchanges was average but the market internals show a significant advantage to the bulls. Tuesday marks the last day where we assigned a reasonably high probability for a reversal. Economic reports on housing can help lift the markets on Tuesday but the key will be the Fed, which releases its rate decision and policy statement at 2:15pm EDT.

We now have the bank indexes approaching neutral with a potential BULLISH BIAS on the horizon for later this week. We are still bothered by the lack of participation of semiconductors in this rally. All of the equity indexes we monitor are oversold with the exception of the bank indexes. With the Regional Bank Index set to confront its 200-DMA as early as Tuesday, we are still leery and will keep our puts. As we suggested when we added the puts last Friday, we favor a continued move higher, but there is still a probability that we finally see a reversal to the downside. We will remain patient as gains from our long positions continue to increase.

We hope you have enjoyed this edition of the McMillan portfolio. You may send comments to

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By Mark McMillan

Important Disclosure
Futures, Options, Mutual Fund, ETF and Equity trading have large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in these markets. Don't trade with money you can't afford to lose. This is neither a solicitation nor an offer to buy/sell Futures, Options, Mutual Funds or Equities. No representation is being made that any account will or is likely to achieve profits or losses similar to those discussed on this Web site. The past performance of any trading system or methodology is not necessarily indicative of future results.
Performance results are hypothetical. Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading. Also, since the trades have not actually been executed, the results may have under- or over-compensated for the impact, if any, of certain market factors, such as a lack of liquidity. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown.
Investment Research Group and all individuals affiliated with Investment Research Group assume no responsibilities for your trading and investment results.
Investment Research Group (IRG), as a publisher of a financial newsletter of general and regular circulation, cannot tender individual investment advice. Only a registered broker or investment adviser may advise you individually on the suitability and performance of your portfolio or specific investments.
In making any investment decision, you will rely solely on your own review and examination of the fact and records relating to such investments. Past performance of our recommendations is not an indication of future performance. The publisher shall have no liability of whatever nature in respect of any claims, damages, loss, or expense arising out of or in connection with the reliance by you on the contents of our Web site, any promotion, published material, alert, or update.
For a complete understanding of the risks associated with trading, see our Risk Disclosure.

© 2010 Copyright Mark McMillan - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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