1/10/2012 9:00:00 AM

Equity indexes move higher without the NASDAQ-100...

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- 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.

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Daily Trading Action

The major indexes opened higher and immediately dove for the first fifteen minutes before the bulls stepping in to move the markets higher for the remainder of the first hour of trading. A new leg lower began then that would last most of an hour before the bulls once again stepped in after the major indexes declined to new intraday lows. These lows would mark the nadir as the path would be a slow grind higher for the remainder of the day with the S&P-500 and Dow closing almost exactly where trading opened. The NASDAQ itself closed in positive territory but the NASDAQ-100, which had underperformed all other equity indexes we regularly monitor, closed in negative territory. The semiconductor index (SOX 382.59 +7.37) soared two percent. The Russell 2000 (IWM 75.17 +0.37) posted a one half of one percent gain. The Dow Jones Transport Index (IYT 90.90 +0.59) added a solid two thirds of one percent. The Bank index (KBE 21.12 +0.33) tacked on a gain of +1.5% as did the Regional Bank Index (KRE 25.93 +0.40). The Finance Sector ETF (XLF 13.47 +0.07) posted a gain of one half of one percent. The Bank, Regional Bank, and Finance Sector ETFs are all in uptrend states as are the S&P-500 and the NASDAQ-100. The other equity indexes are in trading states. All but the Semiconductor Index have a BULLISH BIAS. Long term bonds (TLT 118.52 -0.21) closed with a modest loss. It remains in a trading state and retains its BULLISH BIAS but continues to warn of a potential change. Trading volume was light on the NYSE (722M shares traded) while volume increased to below average on the NASDAQ (1.790B shares traded).

There was a single economic report released:

• Consumer Credit (Nov) increased $20.4B versus an expected $7.0B increase

The report was released with one hour remaining in the U.S. Equity trading session.

The U.S. dollar fell one third of one percent and appears to have topped following our declaration of a high probability reversal. The Euro bounced closing four tenths of one percent higher.

The yield for the 10-year note was unchanged at 1.96. The price of the near term futures contract for a barrel of crude oil fell twenty-five cents to close at $101.31.

Implied volatility for the S&P-500 (VIX 21.07 +0.44) rose two percent and the implied volatility for the NASDAQ-100 (VXN 21.22 +0.70) rose more than three percent. Still, both are quite near their six-month closing lows.

Market internals were positive with advancers leading decliners 7:4 on the NYSE and by 5:4 on the NASDAQ. Up volume led down volume 2:1 on both the NYSE and the NASDAQ. The index put/call ratio rose +0.02 to close at 1.40. The equity put/call ratio fell 0.02 to close at 0.60.

Conclusion/Commentary

Monday's market action looked bullish as all equity indexes we monitor moved higher with one noted exception. Of course, the one noted exception was possibly the most important leading index, the NASDAQ-100. With that said, since the index is made up of just one hundred securities, it is fairly easy for a single stock or a few stocks to have undue influence. For instance, Apple (AAPL 421.73 -0.67) has the largest weighting at this time and gapped up at the open but closed lower, quite similar to what happened to the NASDAQ-100.

The Dow and S&P-500 closed up only modestly. The other equity indexes we monitor closed higher with the most bullish being the Semiconductor Index and the bank indexes. This suggests that the risk trade is on and market participants are more worried about achieving gains with the strengthening U.S. economy than the potential weakening due to the sovereign debt crisis in Europe. This suggests that greed is winning out over fear at this time.

We continue to look for signs of a top and the ideal set-up would be for an exaggerated move to the upside initially which would set-up a more dramatic move lower. We will continue to monitor trading to attempt to catch the top and reverse from our long positions.

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