6/24/2014 8:39:38 AM
Equity indexes pull back on light volume...
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: June 10, 2014 $1.00, 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 = $6.28 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.) We have collected dividends: June 10, 2014 $1.00.
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Equities traded in a narrow range on ultralight volume. The Dow finished nine points lower and the S&P-500 a miniscule amount lower. The NASDAQ-100 finished three points higher. While the bears were only able to hold the major indexes in place, they faired better versus other equity indexes with the Russell-2000 (IWM 118.02 -0.23), the Dow Jones Transports (IYT 146.32 -1.00), and the Semiconductor Index (SOX 633.12 -2.29) all closed fractionally lower. The Bank Index (KBE 33.39 -0.04), the Regional Bank Index (KRE 40.09 -0.34), and the Finance Sector ETF (XLF 22.88 +0.05) moved in mixed fashion. All equity indexes we regularly monitor are in uptrend states with the noted exception of the transports which shifted to a trading state. All remain above their respective 20-, 50-, and 200-Day Moving Averages (DMAs) and all maintain a BULLISH BIAS. Longer Term Bonds (TLT 111.45 -0.35) fell fractionally. It remains below its 20-DMAand 50-DMAs but is still above its 200-DMA. It has a NEUTRAL BIAS and maintains a trading state. Trading volume fell sharply to a light 572M shares traded on the NYSE. Trading volume on the NASDAQ also fell sharply to a light 1.699B shares traded.
There was a single economic report of interest released:
• Existing Homes Sales (May) came in at 4.89M versus an expected 4.80M
The report was released a half hour into the session.
Apple (AAPL 90.83 -0.08) posted a modest loss. It has been falling since a 7:1 stock split on June 8th. AAPL constitutes about 20 percent of the NASDAQ-100 and nearly five percent of the S&P-500.
Seadrill Limited (SDRL 40.37 +0.27) added a fractional gain. The next target remains $40.96, it's closing price on the last trading day of 2013. It is in an uptrend state. We sold March 2014 $35.00 put contracts for $150 at the open on Feb 18th, 2014 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 while the Euro was nearly unchanged. The dollar continues to hover below its 200-DMA. The Euro is plumbing the depths at its recent lows. It closed well below its 200-DMA.
The yield for the 10-year treasuries was unchanged for the third session at 2.62. The price of a barrel of crude oil fell sisty-six cents at $106.17.
The implied volatility for the S&P-500 (VIX 10.98 +0.13) rose one percent. The implied volatility for the NASDAQ-100 (VXN 12.30 +0.03) closed flat hovering at a multi-year low not seen since before the financial crisis. What does it mean? It means that there is a remarkable amount of complacency out there.
Market internals were mixed. Decliners led advancers narrowly on the NYSE and by nearly 5:4 on the NASDAQ. Up volume led down volume narrowly on both the NYSE and the NASDAQ. The index put/call ratio rose +0.02 to close at 0.86. The equity put/call ratio rose +0.02 to close at 0.54.
Conclusion/Commentary
Monday saw the bears probe the bulls on lackluster volume, and the bulls bought late in the day to force a basically flat close for the major indexes, but most other equity indexes closed fractionally lower. This is healthy for a bull market to work off overbought conditions and generally, the safest time to buy stocks is after a light volume pullback, preferably one that lasts a few days and doesn't do any real technical damage. So far, we do not have any warning signs that this will be more than that. Until we do, we will remain long.
We hope you have enjoyed this edition of the McMillan portfolio. You may send comments to mark@stockbarometer.com.
