We have to acknowledge our bullish BIAS and exit the short positions in the major index ETFs. We aren't confident yet that the recent highs that represent resistance will be immediately broken, but there is further room to run higher here before these levels are challenged. Tuesday is the first day when traders return from holidays and trading volume is expected to return to normal as compared to the light summer volumes.

Our short TLT position closed at $95.21 on Friday, which represents modest gains for us. Support lies just below so Tuesday represents an important test. If we can see price break down below the $94 level, this suggests that price could move down to the $92 level or lower.

Trade Recommendations:
Buy shares to QQQQ, SPY, and DIA to cover the short positions and to enter long positions at the open.

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

Commentary:
We have to exit our short positions due to the liquidity present in the market. At this time, the bullish sentiment is clear and overwhelming but resistance lies just overhead.

We will use options at key resistance to hedge our positions and to profit from short term reversals. The options will be September put options bought at the market. We will buy them within the final thirty minutes attempting to match the closing price. These options expire in nine sessions so these are truly short term options and the premium we will have to pay is based on that time value. Note: We will also look to buy call options at the next local bottom and show you show to profit from truly short term directional options trades.

We will update the status of our full portfolio tomorrow.

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

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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.
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© 2009 Copyright Mark McMillan - All Rights Reserved
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