6/13/2014 9:01:04 AM
Transports lead the slide lower...
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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.
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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 turn into a sell off with the Dow, S&P-500, and NASDAQ-100 all finishing with fractional losses and shifting to trading states. The Dow Jones Transports (IYT 143.25 -2.87) lost two percent to close below its 20-DMA to lead losers. The Semiconductor Index (SOX 621.35 -2.13) posted a modest loss. The three canaries, the Russell-2000 (IWM 115.39 -0.71) , the Bank Index (KBE 33.11 -0.17), and the Regional Bank Index (KRE 39.93 -0.15) all posted fractional losses and remain in uptrend states. The Finance Sector ETF (XLF 22.60 -0.14) also finished fractionally lower. With the exception of the transports, all equity indexes are currently trading above their 20-, 50-, and 200-Day Moving Averages (DMAs) and all have a BULLISH BIAS. Longer Term Bonds (TLT 112.21 +0.99) added a strong fractional gain to close not far below its 20-DMA and above its 50- and 200-DMAs. It maintains a trading state but has indicated a possible change to a BEARISH BIAS. Trading volume increased but remained light with 622M shares traded on the NYSE. Trading volume on the NASDAQ also increased to below average with 1.878B shares traded.
There were six economic reports of interest released:
- Initial Jobless Claims for last week came in at 317K versus an expected 315K
- Continuing Jobless Claims came in at 2.614M versus an expected 2.638M
- Retail Sales (May) rose +0.3% versus an expected +0.7% rise
- Retail Sales ex-auto (May) rose +0.1% versus an expected +0.4% rise
- Export Prices ex-ag (May) rose +0.1% versus April's -1.1% fall
- Import Prices ex-oil (May) were flat (+0.0%) versus April's +0.1% rise
All six reports were released an hour before the open.
We are watching gold for a potential reversal in the Gold Miners Index (GDX 24.03 +0.62) rose more than two percent to close even with its 200-DMA as the price of Gold (GLD 122.64 +1.23) rose one percent and closed above its 20-DMA.
Apple (AAPL 92.29 -1.57) fell more than one percent. AAPL constitutes about 20 percent of the NASDAQ-100 and nearly five percent of the S&P-500.
Seadrill Limited (SDRL 38.80 +1.06) added most of three percent to close at a level not seen since January. 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 fell two tenths of one percent to close below its 200-DMA. The Euro rose three tenths of one percent and closed well below its 200-DMA weeks ago.
The yield for the 10-year treasuries fell five basis points to close at 2.59. The price of a barrel of crude oil rose +2.13 to close at $106.53.
The implied volatility for the S&P-500 (VIX 12.56 +0.96) rose eight percent. The implied volatility for the NASDAQ-100 (VXN 13.85 +0.48) rose most of four percent. Both remain below their 200-DMAs.
Market internals were bearish. The index put/call ratio fell -0.02 to close at 0.79. The equity put/call ratio rose +0.01 to close at 0.51.
Conclusion/Commentary
This decline for equities was expected. With that said, the decline of the Dow Jones Transport Index has led the decline and broke below its 20-DMA. While the canaries are still in uptrend states, the transports and major indexes all shifted to trading states. It will bear watching on Friday to see if the bulls will finally step in to arrest the recent slide. We will stay long while we monitor trading on Friday.
We hope you have enjoyed this edition of the McMillan portfolio. You may send comments to mark@stockbarometer.com.
