5/30/2014 8:46:20 AM
Was the move premature?
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 gapped up and immediately dipped to closed that gap within the first hour of trading then headed higher the rest of the session. This left alll the major indexes closing at their highs with fracitonal gains across the board and with a new all time closing high for the S&P-500 and a multi-year high for the NASDAQ-100! All three closed above their 20-, 50-, and 200-Day Moving Averages (DMAs) and the Dow maintained its trading state while the NASDAQ-100 and S&P-500 maintained their uptrend states. The Dow Jones Transports (IYT 145.35 +0.64) and the Semiconductor Index (SOX 598.85 +1.19) added fractional gains remaining above their 20-, 50- and 200-DMAs in uptrend states. The Russell-2000 (IWM 113.37 +0.38) added a fractional gain to close above its 20-, 50-, and 200-DMAs. The Bank Index (KBE 31.90 +0.05) added a fractional gain while the Regional Bank Index (KRE 38.31 -0.02) saw a modest loss. Both closed below their respecitve 50- and 200-DMAs but above their 20-DMAs. All three remain in trading states. The Finance Sector ETF (XLF 22.24 +0.06) added about one quarter of one percent and remains above its 20, 50-, and 200-DMAs in an uptrend state. Longer Term Bonds (TLT 114.15 -0.61) fell fractionally lower. It closed above its 20-, 50- and 200-DMAs and is in an uptrend state.. Trading volume was extremely light with 544M shares traded on the NYSE. Trading volume on the NASDAQ was light with 1.688B shares traded.
There were five economic reports of interest released:
- Initial Jobless Claims for last week came in at 300K versus an expected 318K
- Initial Jobless Claims for last week came in at 2.631M versus an expected 2.650M
- GDP Second Estimate (Q1) fell -1.0% versus an expected -0.5% drop
- GDP Deflator Second Estimate (Q1) rose +1.3% as expected
- Pending Home Sales (Apr) rose +0.4% versus an expected +1.0% rise
The first four reports were released an hour before the open and 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 22.24 +0.20) rose most of one percent as the price of Gold (GLD 120.94 -0.26) slipped modestly lower. Both closed below their 20-, 50-, and 200-DMAs.
Apple (AAPL 635.38 +11.37) added nearly two percent. AAPL constitutes about 20 percent of the NASDAQ-100 and nearly five percent of the S&P-500.
Seadrill Limited (SDRL 38.38 +0.84) added two percent and is approaching the bottom side of its 200-DMA. It is in an uptrend state. 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 and the Euro were relatively unchanged.
The yield for the 10-year treasuries rose a single basis point to close at 2.45. The price of a barrel of crude oil rose eighty-six cents to close at $103.58.
The implied volatility for the S&P-500 (VIX 11.57 -0.11) fell one percent and remains well below its 200-DMA. The implied volatility for the NASDAQ-100 (VXN 13.84 -0.20) fell one percent and remains well below its 200-DMA.
Market internals were bullish with advancers leading decliners 2:1 on the NYSE and by 7:5 on the NASDAQ. Up volume led down volume 3:1 on the NYSE and by 2:1 on the NASDAQ. The index put/call ratio fell -0.18 to close at 0.75. The equity put/call ratio fell -0.04 to close at 0.52.
Conclusion/Commentary
Thursday saw a modestly bullish day but one equity indexes finished modestly lower, The Regional Bank Index finished just below flat, while all other equity indexes we regularly monitor finished higher. This follows the S&P-500 and the Dow Jones transports achieving new all time highs, with the NASDAQ-100 and semiconductor indexes achieving new multi-year highs, and the Dow finishing just under an all-time high. Longer term bonds also pulled back nicely. Unfortunately, this likely sets up further choppy markets ahead. We will remain long until the markets indicate a directional move of high probability ahead in the near future. We are still looking for a further move lower by longer term bonds into next week.
We hope you have enjoyed this edition of the McMillan portfolio. You may send comments to mark@stockbarometer.com.
