7/23/2014 8:31:52 AM
Dow and S&P-500 just under new all time highs...
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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 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: 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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A gap up open was followed by a shallow move lower that did not close the gap and then a rally for the remainder of the first hour of trading. The rest of the session was spent moving sideways in a narrow trading range until the final half hour saw prices dip back toward their opening values. This was enough to ensure that all three major indexed posted fractional gains and maintained their positions above their 20-, 50-, and 200-Day Moving Averages (DMAs). In fact, except for the canaries, all equity indexes we regularly monitor are above their respective 20-, 50-, and 200-DMAs and have a BULLISH BIAS and are in trading states, with the exception of the Dow Jones Transports (IYT 151.23 +1.61) which added more than one percent and shifted to an uptrend state. 49.62 -0.47). The Semiconductor Index (SOX 649.35 +4.33) and the Finance Sector ETF (XLF 22.92 +0.07) were able to post fractional gains. Of the three canaries, Russell-2000 (IWM 114.73 +0.96) was able to post a gain and closed below its 20-DMA but even with its 50-DMA and above its 200-DMA. It shifted to a trading state but now has a BEARISH BIAS. The other two canaries, the Bank Index (KBE 32.26 -0.04) and the Regional Bank Index (KRE 38.63 -0.16) posted losses and closed below their 20-, 50-, and 200-DMAs. They are in downtrend states and will almost certainly shift to a BEARISH BIAS on Wednesday. Longer Term Bonds (TLT 115.33 +0.24) posted a modest gain. This still looks like a top is being put in here. It maintains an uptrend state and a BULLISH BIAS. It remains above its 20-, 50-, and 200-DMAs. Trading volume remained light with 582M shares traded on the NYSE. Trading volume on the NASDAQ also remained light with 1.697B shares traded.
There were four economic reports of interest released:
• CPI (Jun) rose +0.3% as expected
• Core CPI (Jun) rose +0.1% versus an expected +0.2% rise
• FHFA Housing Price Index (May) rose +0.4% following April's +0.1% reading
• Existing Home Sales (Jun) came in at 5.04M versus an expected 5.00M
The first three reports were released at least a half hour prior to the open while the latter report was released a half hour into the session.
Apple (AAPL 94.72 +0.78) 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 38.00 +0.22) posted a fractional gain. The next target above remains $40.96, it's closing price on the last trading day of 2013. It is in an trading 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 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 one third of one percent closing above its 200-DMA for the first time in a year. The Euro fell four tenths of one percent continuing to trade below its 200-DMA for the last two months. It is at a relative low.
The yield for the 10-year treasuries was unchanged at at 2.47. The price of a barrel of crude oil fell -$2.20 to close at $102.39.
The implied volatility for the S&P-500 (VIX 12.24 -0.57) fell four percent. The implied volatility for the NASDAQ-100 (VXN 13.26 -0.91) fell six percent.
Market internals were bullish. Advancers led decliners 2:1 on both the NYSE and the NASDAQ. Up volume led down volume 2:1 on both the NYSE and the NASDAQ. The index put/call ratio rose +0.05 to close at 1.11. The equity put/call ratio fell -0.03 to close at 0.59.
Conclusion/Commentary
The bulls remain in control, shaking off geopolitical concerns over sanctions placed on Russia for its continued involvement in Ukraine, the airliner shot down over Eastern Ukraine, and the Israely invasion of the Gaza strip. With the NASDAQ-100 closing at multi-year highs and with the Dow and S&P-500 closing just below all-time high levels, U.S. equities markets appear to be breaking out again. The bank indexes continue to threaten to worsen and shift to a BEARISH BIAS on Wednesday. Even though the Russell-2000 has participated in the latest move higher, it has not been leading the rally. We believe caution should continue to be utilized as we are impressed with the staying power of this market. It smacks of complacency, which is unlikely to end well, but investors have decided not to fight the Fed.
We hope you have enjoyed this edition of the McMillan portfolio. You may send comments to mark@stockbarometer.com.
