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Slight Gains on Light Volume...

11/22/2010 9:00:22 AM

The major indexes were able to close in positive territory by a modest amount ending the week about where they began...

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Daily Trend Indications:

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 lower and tested lower for the first half hour of trading before rallying to move higher until around 2:00pm in choppy trade. From that point on the major indexes showed modest weakness until a rally in the final half hour left the major indexes finishing higher on the day. The NASDAQ-100 and DJIA (Dow Jones Industrial Average) finished just under their respective 20-Day Moving Averages (DMAs) while the S&P-500 finished just above its 20-DMA. The Semiconductor Index (SOX 387.09 +6.13) climbed +1.6% higher again outpacing the major indexes. The Russell-2000 (IWM 72.45 +0.24) also outpaced the major indexes gaining one third of one percent. The bank indexes were mixed with the Bank Index (KBE 22.88 +0.16) closing fractionally higher while the Regional Bank Index (KRE 23.02 -0.10) ended with a fractional loss. The 20+ Yr Bonds (TLT 96.59 +0.59) posted a fractional gain. NYSE volume was light with 1.086B shares traded. NASDAQ volume was below average with 1.826B shares traded.

There were no economic reports of interest released. Instead,

The U.S. dollar fell 0.3% for the week as Ireland looks more certain to take a bailout from the European Central Bank (ECB) and the International Monetary Fund (IMF). The CRB Commodity Index (-1.2%) ended the week lower (-1.6%) which is its second consecutive loss after eleven weeks of gains.

Telecom was unchanged and Utilities (-0.3%) and Financials (-0.2%) moved lower. The other seven out of ten economic sectors of the S&P-500 moved higher led by Materials (+0.7%), Energy (+0.6%), and Consumer Discretionary (+0.6%). Consumer Discretionary was helped by Retailers (+1.0%).

Implied volatility for the S&P-500 (VIX 18.04 -0.71) fell nearly four percent and the implied volatility for the NASDAQ-100 (VXN 19.78 -0.48) fell more than two percent.

The yield for the 10-year note fell two and a half basis points to close at 2.875. The price of the near term futures contract for a barrel of crude oil rose thirteen cents to close at $81.98.

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 3:2 on the NYSE and by 11:4 on the NASDAQ. The index put/call ratio fell 0.44 to close at 0.77. The equity put/call ratio rose 0.04 to close at 0.58.


Friday's volume lightened as market participants are wary about pushing the major indexes too much higher following the early week sell-off. Instead, they seem content to have the major indexes close near where they ended the previous week. The 20-DMAs are figuring prominently with the major indexes clustered at those levels. The Russell-2000 and Semiconductor Indexes have outperformed on a relative basis while the Bank Indexes have been underperforming. The long-term bonds (TLT) have been rallying in the latter half of the week and look set to challenge their 200-DMA early in the coming week. Generally, equities move opposite in direction to long term bonds so this is worth noting.

Probably the most significant factor moving the stock market has been the U.S. dollar, which has been moving lower in the second half of the week. It had moved higher for the two weeks prior which caused weakness in equities. With the Irish bailout coming into focus, the Euro is still expected to rally versus the dollar on a fundamental basis but there are many currents under the surface of the water pushing the dollar, equities, and bonds in different directions.

At this time, we think the market could muddle about here for a bit, perhaps moving modestly lower early in the week only to move higher yet again on light holiday trading volume late in the week. We will remain in cash for now.

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


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