5/6/2014 8:51:26 AM
Underlying bearishness has us concerned...
Recommendation: Take no action.
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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 saw a large gap down open that saw immediate buying action dominate trading for a ibt more than an hour. From that point through the lunch hour, prices vacillated modestly before once again moving higher. There was a modest pull back in the final half hour of trading before the bulls cemented gains with buying driving prices higher in the final ten minutes. This left the Dow and S&P-500 above their 20-, 50-, and 200-Day Moving Averages (DMAs) with the NASDAQ-100 caught above its 20- and 200-DMAs but just below its50-DMA. All three closed with modest gains. The Dow Jones Transports (IYT 137.34 -0.29) exited its uptrend state. The Russell 2000 (IWM 111.89 -0.14) also posted a modest loss and is stuck below its 20- and 50-DMAs but above its 200-DMA. The Semiconductor Index (SOX 575.94 +0.45) managed a minor gain. The Regional Bank Index (KRE 38.24 -0.31), and the Bank Index (KBE 31.83 -0.25) both closed fractionally lower and again closed below their respective 200-DMAs. The Finance Sector ETF (XLF 21.90 -0.09) closed fractionally lower as well closing even with its 20-DMA but below its 50-DMA. Longer Term Bonds (TLT 112.03 -0.68) posted a fractional loss but remains in an uptrend state closing above its 20-, 50-, and 200-DMAs. Trading volume was light with 607M shares traded on the NYSE. Trading volume on the NASDAQ was light with 1.544B shares traded.
There was a single economic report of interest released:
- ISM Services (Apr) came in at 55.2 versus an expected 54.0
The report was released a half hour into the session.
We are watching gold for a potential reversal in the Gold Miners Index (GDX 24.41 +0.09) was relatively unchanged while the price of Gold (GLD 126.22 +1.16) rose nearly one percent. Both GDX and GLD closed below their respective 50-DMAs but GDL is now above its 200-DMA while GDX is below that respective moving average.
Apple (AAPL 600.96 +8.38) rose more than one percent. AAPL constitutes about 20 percent of the NASDAQ-100 and nearly five percent of the S&P-500.
Seadrill Limited (SDRL 34.78 +0.45) rose more than one percent. It closed just above its 50-DMA and is above its 20-DMA but below its 200-DMA. 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 treasuries rose two basis points to close at 2.61. The price of a barrel of crude oil fell twenty-eight cents to close at $99.48.
The implied volatility for the S&P-500 (VIX 13.29 +0.38) rose three percent but remains below its 20-, 50, and 200-DMAs. Implied volatility for the NASDAQ-100 (VXN 16.78 -0.25) fell more than one percent. It is still below its 20- and 50-DMAs but above its 200-DMA.
Market internals were bearish mixed with decliners edging advancers on the NYSE while decliners led advancers 5:4 on the NASDAQ. Down volume led up volume 5:4 on the NYSE while the opposite was the case on the NASDAQ. The index put/call ratio rose +0.01 close at 0.96. The equity put/call ratio was unchanged closing at 0.65.
Conclusion/Commentary
While the three major indexes were able to close with fractional gains after a big gap down open, volume was quite light. The three equity indexes that were are monitoring for leadership closed lower. The bank indexes and Russell-2000 all closed lower higher with the bank indexes closing below their respective 200-DMAs but only by a modest amount. While the move was on light volume, we remain concerned that the bulls cannot put together two consecutive days of buying. The bulls have not yet been able to force the Russell-2000 to close above its 20-DMA which is critical for the bulls be begin to get some upside momentum in the small caps. To become bullish, both QQQ and IWM need to rally up to and through 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.
