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Dow and SP500 Close at New All-Time Highs...

5/13/2014 9:13:01 AM

Bullish shift occurs for lagging indexes...

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Stock Market Trends:

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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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 gap up open followed my more buying. After the first fifteen minutes of a meteoric rise, equities settled into a sideways move that lasted through the rest of the morning and lunch hour. The afternoon saw yet more buying but sellers dominated the closing action as prices closed off their intraday highs, but fairly modestly. This was enough for the Dow and S&P-500 to post significant fractional gains and for the NASDAQ-100 to gain more than one percent as it closed above its 20-, 50, and 200-Day Moving Averages (DMAs) and shifted into an uptrend state. All three major indexes are in uptrend states. The Semiconductor Index (SOX 586.48 +10.52) added nearly two percent, shifted to an uptrend state and closed above its 20-. 50-, and 200-DMAs as did the Dow Jones Transports (IYT 140.75 +2.58). The Russell-2000 (IWM 112.53 +2.50) added more than two percent closing above its 20- and 200-DMAs but still below its 50-DMA. It shifted to a trading state. The Bank Index (KBE 32.22 +0.50) rose 1.5% and the Regional Bank Index (KRE 38.94 +0.72) soared nearly two percent. The Finance Sector ETF (XLF 22.15 +0.22) rose one percent. This was enough for the bank indexes to join the Finance Sector ETF to close above their respective 200-DMAs. Longer Term Bonds (TLT 110.79 -0.45) slipped fractionally as it has been held at its 400DMA for eight consecutive sessions. TLT is in a trading state and closed below its 20-DMA but remains above its 50- and 200-DMAs. Trading volume remained light with 641M shares traded on the NYSE. Trading volume on the NASDAQ remained average with 1.850B shares traded.

There was a single economic report of interest released:

  • Treasury Budget (Apr) came in at +$106.9B versus an expected +$114.0B

The report was released a half hour into the session.

After eleven consecutive sessions the other way, the NASDAQ has shifted back to having more new highs than new lows. We view this as the pendulum swinging back the other way.

We are watching gold for a potential reversal in the Gold Miners Index (GDX 23.93 +0.20) rose most of one percent. The price of Gold (GLD 124.94 +0.84) rose fractionally. Both indexes closed below their respective 20, 50-, and 200-DMAs.

Apple (AAPL 592.83 +7.28) 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 35.49 +0.48) rose more than one percent and remaining above the support of its 20- and 50-DMAs. 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 rose one tenth of one percent while the Euro was essentially unchanged.

The yield for the 10-year treasuries rose four basis points to close at 2.66. The price of a barrel of crude oil rose sixty cents to close at $100.59.

The implied volatility for the S&P-500 (VIX 12.23 -0.69) slipped five percent remaining well below its 200-DMA and at the same level as its lowest level earlier this year. The implied volatility for the NASDAQ-100 (VXN 15.49 -1.03) slipped six percent to close below its 200-DMA for the first time since early March.

Market internals were bullish with advancers leading decliners 4:1 on both the NYSE and the NASDAQ. Up volume led down volume more than 5:1 on both the NYSE and the NASDAQ. The index put/call ratio fell -0.34 to close at 0.43. The equity put/call ratio fell -0.19 to close at 0.53.


Monday saw a significant move higher which changed the underlying states of many equity indexes and saw all three laggard indexes move back above their 200-DMAs. The Russell-2000, Bank Index, and the Regional Bank Index all closed back above their 200-DMAs and shifted to trading states. This suggests the bulls will continue to press equities higher following the Dow and S&P-500 new all-time closing highs recorded on Monday. We are staying long until this plays out.


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


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