Downside Action Continues...
6/23/2009 12:02:00 PM
We have seen the expected pull back, now what?
Three more banks are shuttered
During the last week, three more banks were shuttered by state administrators. Once again, Georgia was among the states involved. Georgia now has 20% of all the banks in the United States closed in 2009 which is a dubious honor, at best.
Market Outlook and Conclusion
On Friday, the TED Spread closed in the normal range only off a fraction of a point from a week earlier. Interbank lending markets are functioning normally.
The price of oil climbed to over seventy dollars per barrel (as determined by the near month futures) before settling at $69.55 last Friday.
As we suggested, a downside move made further progress last week and isn't yet done. Our model portfolio closed significant gains on six positions with anywhere from 75% - 95% gain on each position. These were in anticipation of the move downward which has picked up steam.
Looking at the major market indexes, the Dow and S&P-500 are trading below their 200-Day Moving Averages (DMAs), while the NASDAQ and NASDAQ-100 are still above theirs. The Semiconductor Index, which is a good barometer for the overall market, is moving down toward its 200-DMA and we suspect it will bounce if/when it hits that area.
Last week we stated, "It is now time to aggressively short the market, at least for a short/intermediate term trade. The bears are getting the upper hand and a resultant move could be larger than you would think, even in a single day." We saw some significant movement and there is a bit more yet to come. Monday's move actually put the major indexes into oversold conditions, but things can become more oversold.
We will reiterate what we stated last week, "You need to consider putting on some short/intermediate term short trades and should have already taken defensive action on your long positions. Follow what we do in our portfolio to make some profits on the downside and watch for us to add to our long-term portfolio when we call the next bottom."
You need to be a little less aggressive in adding to short positions here and watch our moves in the short/intermediate term portfolio as we will either attempt to enter short positions on a light volume move higher, or enter long positions when it appears a bottom is likely in.
Our closed positions have netted a Return on Investment (ROI) of 352% in our long term portfolio currently holds an average gain of 70% per closed position. Our unrealized gains on open positions are up more than 88% and we have ample cash to enter new long-term positions as well as short/intermediate term positions.
We believe that you can use this bull/bear clash to your advantage. To see how we will play this actively, you should consider a subscription to the McMillan Portfolio.
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