Tight Range

by Larry Levin

Friday was a real snoozer; however, the NYSE volume was surprisingly good. I had expected it to come in much lower. Because of Friday's tight range, Monday could lead to some real fireworks.

The following is an excerpt from a recent John Mauldin blog...

A Positive Third Quarter?

Those who are calling for the end of the recession are shouting that the third quarter may be positive in terms of GDP. And that is possible. But only for statistical and not for fundamental reasons. For instance, lower imports are a net positive for GDP. But lower imports mean a weaker economy. Government spending adds to GDP. Normally, if the government spends too much, then we get inflation, which is subtracted from nominal GDP to give us real (after-inflation) GDP. But inflation is low and getting lower, so there is not going to be much to subtract from nominal GDP. Are government spending and massive deficits a sign of fundamental strength?

It is quite usual for there to be a positive quarter in the middle of a recession. Watch the fundamentals: industrial production, unemployment, capacity utilization, tax receipts, etc. When those turn up, or at least level off, the recession is over. Then we get to the long recovery.

Quick point. As I have noted, unemployment is at 9.5% and going to 11% and hopefully no higher. Average hours worked per week is at an all-time low. The number of people working part-time but wanting full-time work is another 7%! And that part-time number is rising very rapidly.

When the recovery actually does begin to manifest itself, and it eventually will as we find the New Normal, what do you think employers are going to do? Hire new workers? Or give their current employees more hours? The latter, of course. This is going to be a long, slow, painful, jobless recovery. Unemployment is going to remain stubbornly high.

And this Congress wants to raise taxes on small business. 75% of the "rich" are small businesses. How do you expand your business in California or New York, where taxes will be over 60% by the time you add in local taxes? We will talk about this next week; but as a preview, from an economic viewpoint, massively raising taxes in the middle of a recession is about as dumb as you can get. But it looks like we are headed there. Green shoots, my foot.



Previous Day's Trading Room Results:

Trade Date: 7/17/09

E-Mini S&P Trades*
(before fees and commissions):

1) OTF sell @ 11:00am at 934.00 = -.75 (1 lot)

2) Engf sell @ 11:30am at 934.75 = -.75 (1 lot)

3) Algorithm positions (4)

4) "Reading the Tape" positions (0) ...combined Secret's, Algo, & "Reading the Tape" total...+3.50


Electronic (YM) Mini-Dow:

1) None today



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