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5/14/2014 9:08:27 AM

Dow and S&P-500 post new all time highs...

Recommendation: Take no action.

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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

Click here to learn more about my services and for our ETF Trend Trading.

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 higher open but rolled over after an hour of attempting to move higher. All three major indexes still closed with modest gains and are above their 20-, 50-, and 200-Day Moving Averages (DMAs). The Semiconductor Index (SOX 581.87 -4.61) closed fractionally lower while the Dow Jones Transports (IYT 141.40 +0.65) closed fractionally higher. The Russell-2000 (IWM 111.43 -1.10), the Bank Index (KBE 31.99 -0.23), and the Regional Bank Index (KRE 38.44 -0.50) were all tagged with losses which drove both bank indexes to close even with their 200-DMAs. The Finance Sector ETF (XLF 22.13 -0.02) closed relatively flat. Longer Term Bonds (TLT 111.75 +0.96) added a nice fractional gain. It has been held at its 400DMA for nine consecutive sessions. TLT is in a trading state and closed back above its 20-DMA. It remains above its 50- and 200-DMAs. Trading volume remained light with 604M shares traded on the NYSE. Trading volume on the NASDAQ remained average with 1.861B shares traded.

There were five economic reports of interest released:

  • Retail Sales (Apr) rose +0.1% versus an expected +0.3%
  • Retail Sales ex-auto (Apr) were flat (+0.0%) versus an expected +0.6%
  • Export Prices ex-agriculture (Apr) fell -1.2% versus March's +0.8% rise
  • Import Prices ex-oil (Apr) were flat (+0.0%) versus March's +0.3%
  • Business Inventories (Mar) rose +0.4% as expected

The first four reports were released an hour before the open. The last report was released a half hour into the session.

We are watching gold for a potential reversal in the Gold Miners Index (GDX 23.75 -0.18) posted a fractional loss. The price of Gold (GLD 124.60 -0.34) posted a modest loss. Both indexes closed below their respective 20, 50-, and 200-DMAs.

Apple (AAPL 593.76 +0.93) closed with a modest gain. AAPL constitutes about 20 percent of the NASDAQ-100 and nearly five percent of the S&P-500.

Seadrill Limited (SDRL 35.48 -0.01) closed flat. It remains 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 nearly one quarter of one percent while the Euro fell four tenths of one percent.

The yield for the 10-year treasuries fell four basis points to close at 2.62. The price of a barrel of crude oil rose +$1.11 to close at $101.70.

The implied volatility for the S&P-500 (VIX 12.13 -0.10) slipped fractionally lower remaining well below its 200-DMA and at its lowest level of the year. The implied volatility for the NASDAQ-100 (VXN 15.37 -0.12) slipped fractionally lower. It remains below its 200-DMA.

Market internals were bearish with decliners leading advancers 5:4 on the NYSE and by 2:1 on the NASDAQ. Down volume led up volume by 5:4 on both the NYSE and the NASDAQ. The index put/call ratio rose +0.46 to close at 0.89. The equity put/call ratio rose +0.08 to close at 0.61.


Tuesday saw the bears flex their muscles as the bulls strove to take equity markets higher. While the major indexes posted fractional gains, the three laggard indexes moved back toward their 200-DMAs. The Russell-2000 closed modestly above its 20- and 200-DMA while the Bank Index and the Regional Bank Index closed even with their 200-DMAs. This is concerning as the sign we have been looking for is that these three indexes have to move with or even lead equities higher to ensure a continued bullish market. The Dow and S&P-500 achieved new all-time closing highs but this will not be enough if the laggards do not become bullish as well. We are staying long for now.


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


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