10/15/2014 9:31:21 AM
Waiting to exhale...
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
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: 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 opened around flat then, after initially vascilating moved higher in the morning then moved lower for most of the afternoon. The final forty five minutes saw a modest move higher and that left the major indexes closing modestly higher. The Canaries: the Russell-2000 (IWM 105.54 +1.22), the Bank Index (KBE 30.82 +0.16), and the Regional Bank Index (KRE 37.05 +0.31) all moved higher, although the gains were anything but uniform. The Semiconductor Index (SOX 559.67 +10.20) soared most of two percent leaving behind a Hirami star candlestick pattern. The Dow Jones Transport Index (IYT 141.87 +3.80) was the star of the bulls adding nearly three percent and closing back above its 200-Day Moving Average (DMA). Longer Term Bonds (TLT 121.57 +0.79) added a fractional gain. It closed above its 20-, 50-, and 200-DMAs, is in an uptrend state and has a BULLISH BIAS. Trading volume remained average with 972M shares traded on the NYSE. Trading volume on the NASDAQ remained heavy with 2.478B shares traded.
There were no economic reports of interest released with the next report due out on Wednesday.
Apple (AAPL 98.75 -1.06) fell one percent. AAPL constitutes about 20 percent of the NASDAQ-100 and nearly five percent of the S&P-500.
Seadrill Limited (SDRL 22.86 -0.02) closed flat. The price of crude oil fell the largest amount in a single day this year, falling nearly four dollars per barrel. SDRL is in a downtrend state and closed below its 20-, 50-, and 200-DMAs. 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 $2.98 of total dividends. 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 yield for the 10-year treasuries fell eight basis points to close at 2.21. The price of a barrel of crude oil fell -$3.93 to close at $81.84.
The implied volatility for the S&P-500 (VIX 22.79 -1.85) fell most of eight percent and the implied volatility for the NASDAQ-100 (VXN 25.00 -0.72) fell nearly three percent.
Market internals were bullish with advancers leading decliners 8:5 on the NYSE and by 5:3 on the NASDAQ. Up volume led down volume 3:2 on the NYSE and by 2:1 on the NASDAQ. The index put/call ratio fell -0.55 to close at 0.88. The equity put/call ratio fell -0.13 to close at 0.78.
Conclusion/Commentary
While the precipitous decline for equities is not definitively over, the bulls let out a sigh of relief as the headlong plunge ended with all equity indexes closing in positive territory. We had predicted a reversal for early this week, which came about. With that said, we are now concerned with the incredible fall in the index and equity put/call ratios. It appears that there is too much complacency at this point and equities will have to test lower yet again to put in a bottom. Once again, we will monitor trading and we are readying to get long QQQ when a bottom appears to be in place.
We hope you have enjoyed this edition of the McMillan portfolio. You may send comments to mark@stockbarometer.com.
