5/23/2014 7:39:47 AM
Canaries outperform...
Recommendation: Take no action.
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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 modest gap up open followed by selling or marching in place for the first fifteen minutes before rallying into the top of the hour. The market continued to drive higher for most of the rest of the session with plenty of modest pullbacks or sideways moves along the way to keep market participants guessing. With one hour remaining, the bears took control and forced prices lower allowing the Dow to finish only ten points higher. The NASDAQ-100 and S&P-500 were both able to add stronger fractional gains than the Dow and all three finished above their 20-, 50-, and 200-Day Moving Averages (DMAs) with the NASDAQ-100 continuing to show relative strength over the others. The Dow Jones Transports (IYT 141.93 +0.68) and the Semiconductor Index (SOX 584.30 +2.49) also added fractional gains and closed above their respective 20-, 50-, and 200-DMAs. Of course, the Russell-2000 (IWM 110.76 +1.14) added a full one percent gain and was able to close above its 20-DMA but just below its 200-DMA. The Bank Index (KBE 31.63 +0.16) and the Regional Bank Index (KRE 37.96 +0.19) both added fractional gains but remain below their respective 20-, 50-, and 200-DMAs. The Finance Sector ETF (XLF 21.97 +0.10) also added a fractional gain and closed even with its 50-DMA but above its 20- and 200-DMAs. Longer Term Bonds (TLT 112.10 -0.16) posted a modest loss closing even with its 20-DMA but remaining above its 50- and 200-DMAs. It maintains a trading state. Trading volume remained light with 577M shares traded on the NYSE. Trading volume on the NASDAQ was below average with 1.817B shares traded.
There were four economic reports of interest released:
- Initial Jobless Claims for last week came in at 320K versus an expected 305K
- Continuing Jobless Claims for last week came in at 2.653M versus an expected 2.700M
- Existing Homes Sales (Apr) came in at 4.65M versus an expected 4.66M
- Leading Economic Indicators (Apr) came in at +0.4% versus an expected +0.5%
Two of the reports were released an hour before the open. The other two came out a half hour into the session.
We are watching gold for a potential reversal in the Gold Miners Index (GDX 23.39 -0.06) posted a modest loss. The price of Gold (GLD 124.67 +0.28) rose modestly. Both closed below their 20-, 50-, and 200-DMAs.
Apple (AAPL 607.27 +0.96) 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 36.70 +0.57) rose most of two percent as it came within three cents of its May 8th intraday high. It is in an uptrend state and 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 rose two tenths of one percent while the Euro fell a quarter of one percent.
The yield for the 10-year treasuries rose two basis points to close at 2.56. The price of a barrel of crude oil fell thirty-three cents to close at $103.74.
The implied volatility for the S&P-500 (VIX 12.03 +0.12) rose one percent but remains well below its 200-DMA. The implied volatility for the NASDAQ-100 (VXN 14.20 -0.30) fell two percent and remains below its 200-DMA.
Market internals were bullish with advancers leading decliners nearly 2:1 on the NYSE and by 3:2 on the NASDAQ. Up volume led down volume nearly 2:1 on the NYSE and by nearly 3:1 on the NASDAQ. The index put/call ratio rose +0.14 to close at 0.85. The equity put/call ratio rose +0.03 to close at 0.71.
Conclusion/Commentary
Thursday saw Russell-2000 lead equities higher, supported by the other leading indexes. In fact, all equity indexes we regularly report on added gains. Longer term bond prices posted only a modest loss and will likely try to rally here just as many equity indexes appear at or near overbought levels. All three canaries (IWM, KBE, KRE) closed higher but all three remain below their 200-DMAs. With the Russell-2000 closing above its 20-DMA and just below its 200-DMA, push should come to shove on Friday as bulls and bears fight for short term control. It would be bullish if the Russell2000 closed back above its 200-DMA. 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.
