5/9/2014 9:18:40 AM
Bull assault repulsed...
Recommendation: Take no action.
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- 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.
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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 opened relatively flat and then screamed higher as bulls were buying and bears were covering short positions. That move higher saw only one minor pull back through the morning as a euphoria took over. By noon, that run higher was over and by the middle of the lunch hour, the bears began to push prices lower. That move lasted until the final hour of trading and prices moved down to negative territory. The final hour saw equity prices rally with the S&P-500 and the NASDAQ-100 recording modest losses but the Dow recorded a modest gain. Both the Dow and S&P-500 are within one percent of attaining a new all-time closing high. The NASDSAQ-100 continues to struggle. It is in a trading state and closed below its 20- and 50-Day Moving Averages (DMAs). The Dow is in an uptrend state while the S&P-500 remains in a trading state. Both closed above their 20-, 50-, and 200-DMAs. The Semiconductor Index (SOX 577.83 +3.84) and the Dow Jones Transports (IYT 137.87 +0.07) posted fractional gains while the Russell-2000 (IWM 109.03 -1.11) lost one percent. The Bank Index (KBE 31.66 +0.00) closed flat and the Regional Bank Index (KRE 37.89 -0.17) closed with a fractional loss. Both shifted to trading states. The Finance Sector ETF (XLF 21.94 +0.06) closed above its 20-DMA but below its 50-DMA. All equity indexes that we regularly monitor are now in trading states with the noted exception of the Dow, which is in an uptrend state. Longer Term Bonds (TLT 111.60 -0.48) slipped fractionally as it has been held at its 400DMA for six consecutive sessions. TLT shifted to a trading state but remains above its 20-, 50-, and 200-DMAs. Trading volume was light with 694M shares traded on the NYSE. Trading volume on the NASDAQ was heavy with 2.399B shares traded.
There were two economic reports of interest released:
- Initial Jobless Claims for last week came in at 319K versus an expected 325K
- Continuing Jobless Claims for last week came in at 2.685M versus an expected 2.750M
Both reports were released an hour before the open.
For ten sessions in a row, the NASDAQ has had more new lows than new highs. So, even when the NASDAQ shows gains and otherwise shows bullish market internals, the number of new lows continues to be greater than the number of new highs. This is clearly a sign of weakness. The last time there were ten or more consecutive sessions where the NASDAQ had more new lows than new highs was in November 2012 which corresponds with the last time that the NASDAQ-100 was trading below its 200-DMA. The NASDAQ-100 struggled the entire month of December before starting a grinding move higher that lasted the entire year of 2013.
We are watching gold for a potential reversal in the Gold Miners Index (GDX 23.74 -0.07) slid modestly. The price of Gold (GLD 124.17 +0.00) closed flat. Both indexes closed below their respective 20, 50-, and 200-DMAs.
Apple (AAPL 587.99 -1.05) slipped modestly. AAPL constitutes about 20 percent of the NASDAQ-100 and nearly five percent of the S&P-500.
Seadrill Limited (SDRL 35.97 +0.51) added 1.5% and looks set to have a confrontation with its upper Bollinger Band. It closed above its 20- and 50-DMAs but is well 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. rose two tenths of one percent while the Euro slipped one half of one percent.
The yield for the 10-year treasuries rose a basis point to close at 2.60. The price of a barrel of crude oil fell fifty-one cents to close at $100.26.
The implied volatility for the S&P-500 (VIX 13.43 +0.03) and the implied volatility for the NASDAQ-100 (VXN 17.42 +0.02) were essentially unchanged.
Market internals were bearish with decliners leading advancers 7:5 on the NYSE and by 2:1 on the NASDAQ. Down volume led up volume 3:2 on both the NYSE and the NASDAQ. The index put/call ratio rose +0.16 to close at 0.92. The equity put/call ratio fell -0.01 to close at 0.66.
For the second consecutive session, there was a tremendous turnaround in the equities markets. This time, it was sellers who hit the market from mid-day after the bulls bought all morning. Still, the semiconductors, the transports, and the Dow were able to achieve gains. Thursday's volume was lower than experienced on Wednesday and all equity indexes (except for the Dow) are now in trading states. I am so bearish I am using myself as a contrarian indicator. I believe it means that the bulls have the chance to drive many equity indexes to all-time highs in the short term. We are staying long until this plays out.
We hope you have enjoyed this edition of the McMillan portfolio. You may send comments to email@example.com.