4/29/2014 8:53:35 AM
Bulls step in to force markets higher...
Bears mount challenge and are defeated...
Recommendation: Take no action.
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Stock Market Trends:
- ETF Positions indicated as Green are Long ETF positions and those indicated as Red are short positions.
- The State of the stock 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 an ETF position. If the BIAS is Bullish but the stock 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 ETF trade on "weaker" signals than you might otherwise trade on as the stock 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.
Best ETFs to buy now (current positions):
Long DIA at $161.48 as of December 19, 2013
Long QQQ at $85.99 as of December 19, 2013
Long SPY at $181.19 as of December 19, 2013
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Long SDRL at $33.90 on June 15, 2012 (Shares were put to us when options expired. We were paid $1.10 per share when we sold those options and bought shares for $35.00 each). We have collected dividends: March 5, 2014 $0.98, December 3, 2013 $0.95, September 5, 2013 $0.91, June 5, 2013 $0.88, $1.70 Dec 4, 2012, $0.84 Sep 4, 2012. Total = $5.28 in dividend payments.
Short FXE at $124.19 on August 24, 2012
Long UUP at $22.43 on August 24, 2012
Short FXE at $134.48 on October 4, 2013
Long SDRL at $35.43 on Feb 18, 2014
Long SDRL at $33.50 on March 21, 2014 (Shares were put to us when options expired. We were paid $1.50 per share when we sold those options and bought the shares for $35.00 each.
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Equities gapped up at the open then sold off to close the opening gap in the first fifteen minutes. The bulls then stepped in to drive prices even higher than the gap up open for forty-five minutes before the bears lowered the boom. The smack down lasted until around 1:30pm forcing the leading indexes to be more than one percent lower than Friday's close and off more than two percent from intraday highs. The Dow and S&P-500 were never down more than fractionally and all three major indexes closed fractionally higher where they had opened. The Dow and S&P-500 closed above their 20-, 50-, and 200-Day Moving Averages (DMAs) while the NASDAQ-100 remains below its 20- and 50-DMAs. This left behind three doji candlesticks which signifies uncertainty in the markets. Given the pattern from Friday and Monday, it also signifies a likely bottom. The Semiconductor Index (SOX 568.55 -3.64) closed fractionally lower as did the Russell 2000 (IWM 110.96 -0.65). The Dow Jones Transports (IYT 135.59 +0.00) closed flat. The Finance Sector ETF (XLF 21.72 21.72 -0.13) and the Regional Bank Index (KRE 38.49 -0.29) closed fractionally lower while the Bank Index (KBE 31.90 -0.32) was off a full percent due to Bank of America (BAC 14.95 -1.00) collapsing when they reported they has mis-calculated four billion dollars. The bank announced that they would not be able to raise the dividend from one cent to five cents and they would not be able to buy back stock. Longer Term Bonds (TLT 110.79 -0.54) posted a fractional loss as it appears to have put in a top. Trading volume was average with 821M shares traded on the NYSE. Trading volume on the NASDAQ was heavy with 2.330B shares traded.
There was a single economic report of interest released:
- Pending Homes Sales (Mar) rose +3.4% versus an expected +1.0% rise
The report was released a half hour after the open. February's Pending Homes Sales was revised to -0.5% versus the previously reported -0.8%.
Other than Bank of America's four billion dollar mistake, market participants continue to watch the situation in Ukraine as Putin continues to threaten military action. Western nations continue to isolate Russia with economic sanctions after their illegal annexation of the Crimea from Ukraine. While it can undermine the wealth of the Russian elite and push Russia into a recession, the West is still missing the point as Putin is popular with the Russian people in Russia.
We are watching gold for a potential reversal in the Gold Miners Index (GDX 23.99 -0.47) lost two percent and Gold (GLD 124.88 -0.55) posted a fractional loss. Both GDX and GLD closed below their respective 20-, 50-, and 200-DMAs.
Apple (AAPL 594.09 +22.15) soared four percent. AAPL constitutes about 20 percent of the NASDAQ-100 and nearly five percent of the S&P-500.
Seadrill Limited (SDRL 34.68 -0.09) posted a fractional loss. It now trades above its 20-DMA but below its 50- and 200-DMAs and is in a trading state. We sold March 2014 $35.00 put contracts for $150 at the open on Feb 18th and bought shares at $35.43. The stock is now trading ex-dividend for $0.98. The shares were put to us at $35.00 less the $1.50 per share we were paid for the puts, so we have an effective price of $33.50.
The U.S. dollar fell one tenth of one percent while the Euro rose a like amount.
The yield for the 10-year rose six basis points to close at 2.73. The price of a barrel of crude oil rose twenty-four cents to close at $100.84.
The implied volatility for the S&P-500 (VIX 13.97 -0.09) closed relatively flat and remains below its 20-, 50, and 200-DMAs. Implied volatility for the NASDAQ-100 (VXN 18.74 +0.15) rose most of one percent and remains well above its 200-DMA and just below its 20-DMA.
Market internals were mixed with advancers leading decliners 11:10 on the NYSE while decliners led advancers 5:3 on the NASDAQ. Down volume led up volume 4:4 on the NYSE and by 2:1 on the NASDAQ. The index put/call ratio fell -0.40 to close at 0.90. The equity put/call ratio fell -0.02 to close at 0.69.
Monday saw volume increased as the bears attacked and the bulls counterattacked to lift the major indexes. The other leading indexes and the financials still looked bad, however, so the bulls are not out of the woods on this yet. We remain long as we monitor trading on Tuesday.
We hope you have enjoyed this edition of the McMillan portfolio. You may send comments to email@example.com.