11/19/2010 9:19:45 AM

Conviction that Ireland would accept some sort of bailout strengthened foreign markets and saw nice gains put in on higher volume in U.S. markets ...

Recommendation:
Buy shares of DIA at a limit of $110.79.
Buy shares of QQQQ at a limit of $51.75.
Buy shares of SPY at a limit of $118.71.

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:
In cash.

Daily Trading Action

The major index ETFs opened much higher, ran higher after the open, shot up after the economic reports were released at 10:00am and continued to move modestly higher until peaking around noon. From that point, it was a slow drift lower with an acceleration in the final hour mitigated by buying activity in the final fifteen minutes. All the major indexes settled close to the 20-Day Moving Average, with the Dow settling on that and the S&P-500 just above and the NASDAQ-100 just below that level. The Semiconductor Index (SOX 380.96 +7.11) moved two percent higher outpacing the major indexes. The Russell-2000 (IWM 72.21 +1.38) nearly matched that two percent move also outrunning the major indexes higher. The bank indexes were mixed with the Bank Index (KBE 22.72 +0.0) closing flat after a gap up open and selling off through the day. The Regional Bank Index (KRE 23.12 +0.29) gained more than one percent but still lagged the major indexes as the banks appear to be out of favor. The 20+ Yr Bonds (TLT 96.00 +0.39) posted a fractional gain. NYSE volume was a little above average with 1.211B shares traded. NASDAQ volume was average with 2.044B shares traded.

There were four economic reports of interest released:

• Initial Jobless Claims for last week came in at 439K versus an expected 442K
• Continuing Jobless Claims came in at 4.295M versus an expected 4.300M
• Leading Economic Indicators (Oct) rose +0.5% versus an expected +0.6% rise
• Philadelphia Fed Index (Nov) came in at 22.5 versus an expected 5.0

The first two reports were released an hour before the open, while the latter two were released a half hour into the session.

The U.S. dollar fell 0.5% in light of a boost of the Euro. Ireland's finance minister indicated he would speak with representatives of the European Central Bank (ECB) the International Monetary Fund (IMF) suggesting that Ireland would take a bailout. Although details haven't been negotiated, the assumption is that the bailout would be on the order of tens of billions of euros which would stabilize the country's sovereign debt.

The big domestic news of the day was General Motors Initial Public Offering. The offering was priced at $33 after being raised based on demand and opened for trading at $35.00. It ran as high as $35.85 before rolling over to record a low of $33.89 and closing at $34.19.

All ten economic sectors of the S&P-500 moved higher led by Energy (+2.2%).

Implied volatility for the S&P-500 (VIX 18.75 -3.01) 21.76 -0.82) fell fourteen percent and the implied volatility for the NASDAQ-100 (VXN 20.26 -2.99) 23.25 -0.48) fell thirteen percent.

The yield for the 10-year note rose to close at 2.90. The price of the near term futures contract for a barrel of crude oil rose $1.41 to close at $81.85.

Market internals were positive with advancers leading decliners 4:1 on the NYSE and by 3:1 on the NASDAQ. Up volume led down volume by 7:1 on the NYSE and by 4:1 on the NASDAQ. The index put/call ratio fell 0.11 to close at 1.21. The equity put/call ratio fell 0.05 to close at 0.54. These levels show incredible complacency.

Commentary:

Thursday's volume improved as the major indexes closed markedly higher. Sitting at/near the 20-DMAs, the major indexes have a major test whether they can re-launch into their uptrend or whether they will resume their downtrend. We will give the edge to the bulls for now but will remain in cash unless our limit orders are filled.

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