11/9/2010 8:47:27 AM

A stronger dollar contained equities prices even as commodities broke to new highs...

Recommendation:
Buy shares of DIA to close the short position at a limit of $112.40.
Buy shares of QQQQ to close the short position at a limit of $53.05.
Buy shares of SPY to close the short position at a limit of $120.05.

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:
Short DIA at $108.57
Short QQQQ at $49.66
Short SPY at $114.82

Daily Trading Action

The major index ETFs opened lower and rose until the NASDAQ-100 and Russell-2000 had closed their opening gaps in the morning as well as achieved their intraday lows. The late morning and afternoon were spent with the major indexes advancing but the S&P-500 and Dow were never able to close their opening caps and closed in negative territory. The Semiconductor Index (SOX 391.88 -0.14) posted a fractional loss as did the Russell-2000 (IWM 73.71 -0.06). The bank indexes closed lower retreating from their 200-Day Moving Averages (DMAs) with the Bank Index (KBE 24.05 -0.14) and the Regional Bank Index (KRE 23.80 -0.19) both posting fractional losses after last week's impressive gains over just three sessions. The 20+ Yr Bonds (TLT 98.42 +0.44) posted a fractional gain. NYSE volume was light with just 908M shares traded. NASDAQ volume was below average with 1.821B shares traded.

There were no economic reports of interest released. Instead, traders keyed off the rising dollar, which gained 0.6% one session following Friday's 0.9% gain. Commodities still rose with the CRB Commodity Index up 0.5% as the inflation trade is on following the Fed's actions to further extend quantitative easing.

Three out of ten sectors in the S&P-500 moved higher led by Energy (+0.3%), Materials (+0.2%), and Tech (+0.1%). Financials (-0.8%) led the way lower following their overheated run higher in the second half of last week.

Implied volatility for the S&P-500 (VIX 18.29 +0.03) and the implied volatility for the NASDAQ-100 (VXN 18.70 +0.03) were both nearly unchanged.

The yield for the 10-year note fell three basis points to close at 2.57. The price of the near term futures contract for a barrel of crude oil rose twenty-one cents to close at $87.06.

Market internals were mixed with decliners leading advancers 6:5 on the NYSE and by 11:10 on the NASDAQ. Down volume narrowly led up volune on the NYSE while up volume led down volume by 11:10 on the NASDAQ. The index put/call ratio fell 0.16 to close at 1.05. The equity put/call ratio rose 0.11 to close at 0.54.

Commentary:

Monday was all about gains in the U.S. dollar constraining a push higher by equities. Even with a push by bulls, the NASDAQ-100 was barely able to close in positive territory with the other equity indexes we regularly follow all posting losses. It is unusual for the CRB Commodity Index to move higher in the same session as the U.S. dollar also moved higher and is indicative of investors concerns about inflation being caused by Fed policy on quantitative easing. Concerns over a bailout of Ireland's sovereign debt were the primary support received by the dollar or rather, the primary reason for the fall of the Euro.

We were looking for a move lower on Monday which we saw, albeit the NASDAQ-100 was able to eek out a gain. We are still looking for a move lower to close the gap left by last Thursday's higher open. This would still be within the range that supports a continued uptrending move which we believe is likely here.

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