Recession Over..(!?!?)
Wednesday, September 16, 2009 at 08:21AM Nope, DJIM will never make such a bold statement. We only say such silly things as a new cycle high is ‘inevitable’ at SPX1K when all expect the great September ‘correction’. It is however, appropriate from someone like a US Fed Chairman to make a statement like that... not traders!. Yup, the most powerful man behind the US banking policy, Mr. Bernanke, made such a statement today. We'll get to this a little later. First, how about this market, eh? Not only did we clear SPX 1050, we did with relative ease, which makes us wonder what this market is capable if we ever get volume back. Overall, the breadth, which we alluded to as one of the most important measures on the market recently, is still very good!. The only notable lagging sector seems to be the financials today. If a bank -broker had 'surprise positive' comments from Barclays, this market may have really melted up and taken out the ST August trend line of 1055. No real news is good news here, keep this Barclays on close watch tomorrow as comments have been `somewhat upbeat, but this can change quickly and so will the market mood.
1055 is resistance as it also is a point or two above the May 08 50% retrace. If we close above today’s new cycle high (1056) this week, say hello to 1068-1070. Otherwise, we pullback some. We didn't say correction, just a pullback.
As far as saying the "recession is over" is concerned, we're in a cautious agreement with Mr. Bernanke. While the headlines state that Bernanke has declared the recession over, his words were actually more guarded..."even though from a technical perspective the recession is very likely over at this point, its still going to feel like a very weak economy for some time." What would give us a final stamp for agreement? The upcoming earning period! We feel this earning period will truly show if we are on track to a recovery. If we are able to show some decent reports, top line revenue growth with some optimistic views from the CEOs from a wide range of sectors, who would then argue that recession is not over? Keep in mind, the recession did not start this year or last year. According to some analysts, the recession began as early as 2007, so it's been around for awhile. Toward the end of 2008, under the pressure of financial crisis, the compounded fear simply drove everyone into thinking this recession would take long time to get out of. Now looking back, how naive we have been and how immature some of the market analysts have acted. Still, there's really no one to blame because we all faced the same dilemma and nobody ever experienced such a series of events like the past 12 months or so.
Today we had quite a few commodity plays breaking out on some heavy volume as the USD turns into dust. Plays such as X last alert in 33‘s hit 39, CLF, MEE, OIH, FCX, RTI etc. all took out the recent high. Also, the action seems pretty broad based as all types of commodity plays shared the similar action. We are sticking to our same strategy when it comes to commodity plays. We won't chase heavily into this kind of strength, but we'd be much more willing buyers of dips. It has worked really well for us in the past. Again, this is completely correlated to the USD rollover and it could go either way overnight, so do take some profits off when you have them.
A couple of tech plays from our shadowlist have also broken out today, SWI, notably FIRE , our last alert in low 19’s for another look on Friday exploded over $22. We updated our Shadowlist yesterday (not link) and those of you who have not done so, now is a good time. Names come and go as we’ve said before. BWY, is one name followed here for awhile hitting new highs today got accidentally omitted from list. AIM is one we added to watch after earnings Monday night, we’ll probably remove it in a few days after watching it today.
We're actually very excited to see this market behave the way it has since the month started. The only regret at this point is that we aren't getting many good entry points due to the persistent uptick action from the market. Again, if this market pullbacks prior to the earning season in any significant way, we'd be very aggressive in buying the dip.
Oh yeah, SPX won the dash to 1050 over Gold, almost in 'Bolt' time!