Friday, September 24, 2010

So the Recession is Officially Over?

The U.S. recession was declared to have ended during the second quarter of 2009, but when will we start to really see unemployment decline and full-time jobs created? According to an article in the September 18th edition of The Economist, recoveries after financial crises are usually slow as the banking system is repaired and institutions rebuild their balance sheets by reducing debt. This debt reduction period lasts around seven years, which would have the U.S. emerge from the recession hangover in 2014.

If we are to fully recover from the recession during 2014, then it would make sense to maintain loose fiscal policy through the end of 2013. This loose fiscal policy would consist of extending all of the Bush tax cuts until 2013. Increasing taxes while the economy is limping along is a good start to pushing the U.S. back into a recession.

Thursday, September 16, 2010

Is Resistance Knocking?

Will history repeat itself or will the S&P 500 Index break through the resistance level at 1125? The S&P 500 Index has been stuck in a trading range since the beginning of May 2010. Of all the major stock indices, the NASDAQ 100 Index is the only one to break through the upper end of the near-term trading range. The S&P 500 Index is going to need some additional buying demand in order to get through this heavy resistance level at 1125. From a pure technical standpoint if the S&P 500 Index can hold the 1116 level and break the 1125 level, then it's possible to see 1150. This market is quick and appears at times to be bi-polar so we need to see some confirmation to the upside. This confirmation will come in the form of higher prices on higher volume.

The technology space is showing some strong relative strength as the majority of companies in the sector are reporting strong results, announcing large share repurchase programs, and initiating or increasing their dividend payout. These technology companies are putting their cash to work via strategies (share repurchases and dividends) to increase shareholder value. Furthermore, there is strong M&A activity in the technology space as companies look to grow their top and bottom lines through non-organic means.