5/2/2014 9:09:35 AM
Bulls and Bears struggle mightily for control...
Critical Juncture...
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.
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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.
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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Value Portfolio:
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 lower at the open and many closed where they opened. The Dow closed slightly lower and the S&P-500 closed flat. The NASDAQ-100 recorded a fractional gain. Most equity indexes closed modestly lower but the Dow Jones Transports (IYT 138.11 ++0.93) posted a fractional gain. The Russell 2000 (IWM 111.94 -0.04) closed flat and traded up to its 20-Day Moving Average (DMA) and down to its 200-DMA intraday. The Regional Bank Index (KRE 38.35 -0.14), and the Bank Index (KBE 31.94 -0.12) both closed modestly lower and are both trying to rally using their 200-DMAs as support. Longer Term Bonds (TLT 112.02 +1.19) added more than one percent and is at the upper end of its up trending channel. Trading volume was light with 699M shares traded on the NYSE. Trading volume on the NASDAQ was average with 2.044B shares traded.
There were eight economic reports of interest released:
- Challenger Job Report (Apr) rose 5.7% versus a decliner of -30.2% in March
- Initial Jobless Claims for last week came in with 344K claims versus an expected 315K
- Continuing Jobless Claims came in with 2.771M claims versus an expected 2.725M
- Personal Income (Mar) rose +0.5% versus an expected +0.4%
- Personal Spending (Mar) rose +0.9% versus an expected +0.6%
- PCE Prices - Core (Mar) rose +0.2% as expected
- ISM Index (Apr) came in at 54.9 versus an expected 54.5
- Construction Spending (Mar) rose +0.2% versus an expected +0.4% rise
The first six reports were released an hour or more before the open. The last two reports were released a half hour into the session.
We are watching gold for a potential reversal in the Gold Miners Index (GDX 23.79 -0.32) slid more than one percent and Gold (GLD 123.80 -0.42) posted a fractional loss. Both GDX and GLD closed below their respective 20-, 50-, and 200-DMAs.
Apple (AAPL 591.48 +1.39) rose modestly. AAPL constitutes about 20 percent of the NASDAQ-100 and nearly five percent of the S&P-500.
Seadrill Limited (SDRL 34.44 -0.78) slid two percent after Exxon reported earnings that showed a decrease in capital expenditures and exploration. It now trades above its 20- but below its 50-DMA and below its 200-DMA 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 and the Euro were essentially unchanged.
The yield for the 10-year fell four basis points to close at 2.61. The price of a barrel of crude oil fell thirty-two cents to close at $99.42.
The implied volatility for the S&P-500 (VIX 13.25 -0.16) slipped one percent and remains below its 20-, 50, and 200-DMAs. Implied volatility for the NASDAQ-100 (VXN 17.15 -0.53) slipped three percent to close below its 20- and 50-DMAs but above its 200-DMA.
Market internals were mixed with advancers leading decliners 4:3 on the NYSE while decliners led advancers 11:10 on the NASDAQ. Up volume led down volume modestly on the NYSE and by nearly 3:2 on the NASDAQ. The index put/call ratio rose +0.10 close at 0.81. The equity put/call ratio rose 0.02 to close at 0.56.
Conclusion/Commentary
Thursday saw the bulls in a winner take all struggle. The key is to watch the Russell-2000 and the bank indexes. The bank indexes and Russell-2000 are all near their respective 200-DMAs. If they are not able to break out higher here, then these three weak equity indexes will lead markets lower. However, the bulls see willing to try to cause the rally from here so we will remain long as we watch the battle take place. In the near term, we are watching the Russell-2000 to see if the bulls can force a close above the 20-DMA. In addition, we are watch QQQ and IWM to see if a rally can break above the downtrend line which has defined trading since March.
We hope you have enjoyed this edition of the McMillan portfolio. You may send comments to mark@stockbarometer.com.
