6/12/2014 8:57:21 AM
Volume continues to lighten...
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
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 gap down open then moved helter skelter with the Dow and S&P-500 finishing with fractional losses and the NASDAQ-100 finishing flat. The Dow Jones Transports (IYT 146.12 -1.07) was tagged with a fractional loss while the Semiconductor Index (SOX 623.48 +3.23) added about one half of one percent. The three canaries, the Russell-2000 (IWM 116.10 -0.57) , the Bank Index (KBE 33.28 -0.28), and the Regional Bank Index (KRE 40.08 -0.48) all posted losses. All equity indexes are currently trading above their 20-, 50-, and 200-Day Moving Averages (DMAs) and all have a BULLISH BIAS. All equity indexes we regularly monitor maintain their uptrend states. Longer Term Bonds (TLT 111.22 +0.20) closed above its 50- and 200-DMAs but below its 20-DMA. It maintains a trading state but has indicated a possible change to a BEARISH BIAS. Trading volume decreased and remained light with 532M shares traded on the NYSE. Trading volume on the NASDAQ also declined modestly with a light 1.758B shares traded.
There were two economic reports of interest released:
- MBA Mortgage Index for last week saw a +10.3% increase
- Treasury Budget (May) fell by -$130.0B versus April's -$138.7B fall
The first report was released hours before the open and the final report was released with two hours remaining in the session.
We are watching gold for a potential reversal in the Gold Miners Index (GDX 23.41 +0.38) rose more than one percent as the price of Gold (GLD 121.41 +0.02) closed flat. Both closed below their 50-, and 200-DMAs but GDX closed above its 20-DMA.
Apple (AAPL 93.86 94.25 +0.55) posted a fractional gain. AAPL constitutes about 20 percent of the NASDAQ-100 and nearly five percent of the S&P-500.
Seadrill Limited (SDRL 37.74 -0.51) slid more than one percent after adjusting for the one dollar dividend. 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 and one dollar for total dividends issued of $1.98. The stock fell back to just below its 200-DMA. 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 on its 200-DMA. The Euro fell a tenth of one percent and broke below its 200-DMA weeks ago. Are we seeing a change in long term trend here?
The yield for the 10-year treasuries was unchanged at 2.64. The price of a barrel of crude oil rose +0.05 to close at $104.40. The U.S. Government reported that crude oil inventories declined by -2.596M barrels last week.
The implied volatility for the S&P-500 (VIX 11.60 +0.61) rose five percent. The implied volatility for the NASDAQ-100 (VXN 13.37 +0.20) rose 1.5%. Both remain well below their 200-DMAs.
Market internals were mixed with decliners leading advancers 8:5 on both the NYSE and the NASDAQ. Down volume led up volume 3:2 on the NYSE while up volume edged down volume on the NASDAQ. The index put/call ratio rose +0.03 to close at 0.81. The equity put/call ratio fell -0.02 to close at 0.50.
Conclusion/Commentary
The decline for equities was, for the most part, relatively modest. In fact, with the semiconductors adding a fractional gain and the NASDAQ-100 closing flat, the bulls appear to be stronger than expected. We will bide our time to see if the bulls jump back in immediately start buying or whether the bears can take prices lower to where the value buyers jump in. If we get a set-up for a potential more dramatic decline, we will reverse our positions to short, but that is not imminent.
We hope you have enjoyed this edition of the McMillan portfolio. You may send comments to mark@stockbarometer.com.
