8/5/2014 9:40:12 AM
Banks do not participate in rally...
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 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 initial buying, then selling from the top of the hour for an hour took many equity indexes into negative territory but most of the rest of the day the bulls took prices higher. Weakness late in the session wasn't enough to erase gains from all the equity indexes we regularly track, with the exception of the Regional Bank Index (KRE 37.79 -0.07). It was the only index that moved lower while the Russell-2000 (IWM 111.66 +0.98) gained nearly one percent and the Bank Index (KBE 31.51 +0.02) closed relatively flat. All the major indexes added fractionals as did the rest of the indexes we regularly monitor. All three major indexes closed below their 20- and 50-Day Moving Averages (DMAs) but remain above their respective 200-DMAs. All equity indexes we regularly monitor are in downtrend states but only the Canaries have a BEARISH BIAS at this time. Longer Term Bonds (TLT 114.26 -0.30) posted a relatively modest loss. It remains in a trading state closing above its 20-, 50- and 200-DMAs. Trading volume fell to light with 676M shares traded on the NYSE. Trading volume on the NASDAQ decreased to light with 1.661B shares traded.
There were no economic reports of interest released.
Apple (AAPL 95.59 -1.51) fell about 1.5% giving up Friday's gains. AAPL constitutes about 20 percent of the NASDAQ-100 and nearly five percent of the S&P-500.
Seadrill Limited (SDRL 35.95 -0.23) fell fractionally as it attempts to find a bottom. It is in a downtrend 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 and the Euro marched in place.
The yield for the 10-year treasuries fell a single basis point to close at 2.50. The price of a barrel of crude oil closed up forty-one cents to close at $98.29.
The implied volatility for the S&P-500 (VIX 15.12 -1.93) fell eleven percent. The implied volatility for the NASDAQ-100 (VXN 16.08 -1.18) fell seven percent. Both remain above their 200-DMAs.
Market internals were BULLISH. Advancers led decliners 5:3 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 +0.42 to close at 1.54. The equity put/call ratio fell -0.41 to close at 0.63. The smart money is hedging for a decline while the other money has already shifted back to bullish.
Conclusion/Commentary
While most equities moved higher on Monday, volume was light. On recent down days, volume has been heavier than seen on Monday. That suggests that the bears may not be done with their attempts to move the market lower. We are interested in re-entered a long position in QQQ when it is clear that the bulls are ready to take equities higher. Until then, those funds sit in cash. In terms of our open long positions, we are mindful that we are losing some of our gains as the markets pull back but we are not yet convinced that this move will continue in the long term. If we had more of a bounce and equities were struggling at a resistance level, we would close them. As it is, we need to monitor trading daily to determine what we will do next. Stay tuned.
We hope you have enjoyed this edition of the McMillan portfolio. You may send comments to mark@stockbarometer.com.
