5/22/2014 9:02:36 AM
Canaries react positively...
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 gap down open followed by buying for the major indexes. The end result was that all three major indexes added fractional gains and closed above their 20-, 50-, and 200-Day Moving Averages (DMAs). The Dow Jones Transports (IYT 141.25 +0.91) and the Semiconductor Index (SOX 581.81 +3.24) also added fractional gains and closed above their respective 20-, 50-, and 200-DMAs. Of course, the Russell-2000 (IWM 109.62 +0.56) was able to add a fractional gain as was the Bank Index (KBE 31.47 +0.21) and the Regional Bank Index (KRE 37.77 +0.26). All three remain below their respective 20-, 50-, and 200-DMAs. They all dove early in the session but never reached Tuesday;s lows before the bulls stepped in to drive prices higher. The Finance Sector ETF (XLF 21.87 +0.14) also added a fractional gain and continues to hover just below its 20- and 50-DMAs but above its 200-DMA. Longer Term Bonds (TLT 112.26 -0.69) posted a fractional loss and appears to be ready to finally break down. We have been predicting a top for four sessions now. It maintains a trading state and sits above its 20-, 50-, and 200-DMAs. Trading volume remained light with 586M shares traded on the NYSE. Trading volume on the NASDAQ was also light with 1.681B shares traded.
Other than the crude oil inventory report, there was a single economic reports of interest released:
- MBA Mortgage Index for last week rose +0.9%.
The report was released hours before the open.
We are watching gold for a potential reversal in the Gold Miners Index (GDX 23.45 +0.06) rose modestly as the price of Gold (GLD 124.39 +0.09) slid modestly. Both closed below their 20-, 50-, and 200-DMAs.
Apple (AAPL 606.31 +1.60) added a modest gain. AAPL constitutes about 20 percent of the NASDAQ-100 and nearly five percent of the S&P-500.
Seadrill Limited (SDRL 36.13 +0.45) added more than one percent. It shifted to an uptrend state and the next hurdle will be to attempt to reach the high seen on May 8th which was $36.78. It remains above the support of its 20- and 50-DMAs with the 20-DMA crossing up through the 50-DMA last Thursday. 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 closed flat while the Euro fell a tenth of one percent.
The yield for the 10-year treasuries rose three basis points to close at 2.54. The price of a barrel of crude oil rose +$1.74 to close at $104.07. The U.S. Government reported that crude oil inventories has dropped by -7.226M barrels last week.
The implied volatility for the S&P-500 (VIX 11.91 -1.05) plummeted eight percent remaining well below its 200-DMA. The implied volatility for the NASDAQ-100 (VXN 14.50 -0.84) fell five percent and remains below its 200-DMA.
Market internals were bullish with advancers leading decliners 2:1 on the NYSE and by 3:2 on the NASDAQ. Up volume led down volume nearly 3:1 on both the NYSE and the NASDAQ. The index put/call ratio fell -0.29 to close at 0.71. The equity put/call ratio rose +0.02 to close at 0.68.
Conclusion/Commentary
Wednesday saw the bulls come back after the bears drove prices down. Every equity index we regularly report on closed higher while longer term bond prices continue to erode. All three canaries (IWM, KBE, KRE) closed higher but all three remain below their 200-DMAs. As we stated before, the bears have lost the initiative. It is now up to the bulls to step in an drive prices back above the 200-DMAs. We will maintain our long positions for now.
We hope you have enjoyed this edition of the McMillan portfolio. You may send comments to mark@stockbarometer.com.
