Running Away With It...
12/3/2010 9:03:25 AM
The bulls are taking the major equity indexes higher and giving no quarter...
Recommendation:
Buy shares of DIA at a limit of $112.82
Buy shares of QQQQ at a limit of $53.30
Buy shares of SPY at a limit of $121.30
Daily Trend Indications:
- Positions indicated as Green are Long positions and those indicated as Red are short positions.
- The State of the 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 a position. If the BIAS is Bullish but the 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 trade on "weaker" signals than you might otherwise trade on as the 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.
Current ETF positions are:
In cash.
Daily Trading Action
The major index ETFs opened higher and moved higher from the open before soaring on better than expected economic news at 10:00am. Fifteen minutes later, the torrid move higher slowed and the rest of the morning was spent moving modestly higher with backing and filling on the way. The afternoon session resulted in sideways to modestly higher movements for the major indexes with the S&P-500 putting in the strongest performance of the day on the back of a large move higher for the bank indexes. The Bank Index (KBE 23.65 +0.89) rose +3.9% on the session and the Regional Bank Index (KRE 23.75 +0.47) rose +2.1%. The Semiconductor Index (SOX 410.56 +7.49) added +1.9% to continue leading the equity indexes we regularly track. The Russell-2000 (IWM 75.13 +0.75) gained one percent. The 20+ Yr Bonds (TLT 95.64 -0.25) posted a fractional losss easing its torrid push lower. NYSE volume was average with 1.118B shares traded. NASDAQ volume was average with 2.033B shares traded.
There were three economic reports of interest released:
- Initial Jobless Claims for last week came in at 436K versus an expected 422K
- Continuing Jobless Claims came in at 4.270M versus an expected 4.200M
- Pending Home Sales (Oct) rose +10.4% versus an expected flat (+0.0%) reading
The first two reports were released an hour before the open and the last report was released at 10:00am.
The U.S. dollar (-0.7%) continued to fall. This sustained the advance in equities. Most of the dollar's fall in recent days has been due to a surge in the Euro as worries over sovereign debt of the PIIGS (Portugal, Italy, Ireland, Greece, Spain) have diminished.
All ten economic sectors in the S&P-500 closed higher led by Financials (+2.6%).
Implied volatility for the S&P-500 (VIX 19.39 -1.97) fell another nine percent and the implied volatility for the NASDAQ-100 (VXN 21.42 -1.77) fell nearly eight percent.
The yield for the 10-year note rose four basis points to close at 3.00. The price of the near term futures contract for a barrel of crude oil rose $1.25 to close at $88.00.
Market internals were positive with advancers leading decliners 5:2 on the NYSE and by 7:4 on the NASDAQ. Up volume led down volume by nearly 6:1 on the NYSE and by nearly 3:1 on the NASDAQ. The index put/call ratio fell 0.32 to close at 1.10. The equity put/call ratio was nearly unchanged rising 0.01 to close at 0.46.
Thursday's trading saw average volume on the major exchanges with the QQQQs (NASDAQ-100) trading on light volume. Another round of stock exchanges around the world finishing higher helped U.S. exchanges to post a higher open even with a negative surprise on unemployment. Optimism prevails and the existing home sales report surprised significantly to the upside empowering the bulls to move the markets higher and the bears to stand aside.
Once again, we missed our opportunity to get long as the major indexes never dipped down to the levels we were looking for. Futures ran higher prior to the released of the Non-farm Payrolls reports Friday morning at 8:30am. That report showed unemployment rise to +9.8% with only 39,000 jobs added. This turned futures from significantly positive to significantly negative. We may finally get an opportunity to get long on a dip in the market. Prudence is still warranted as the major indexes are near resistance so will likely struggle here for a bit. We are changing our limit orders but still would prefer to be long the market here.
Commentary:
Thursday's trading saw average volume on the major exchanges with the QQQQs (NASDAQ-100) trading on light volume. Another round of stock exchanges around the world finishing higher helped U.S. exchanges to post a higher open even with a negative surprise on unemployment. Optimism prevails and the existing home sales report surprised significantly to the upside empowering the bulls to move the markets higher and the bears to stand aside.
Once again, we missed our opportunity to get long as the major indexes never dipped down to the levels we were looking for. Futures ran higher prior to the released of the Non-farm Payrolls reports Friday morning at 8:30am. That report showed unemployment rise to +9.8% with only 39,000 jobs added. This turned futures from significantly positive to significantly negative. We may finally get an opportunity to get long on a dip in the market. Prudence is still warranted as the major indexes are near resistance so will likely struggle here for a bit. We are changing our limit orders but still would prefer to be long the market here.
We hope you have enjoyed this edition of the McMillan portfolio. You may send comments to mark@stockbarometer.com.
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Author: Mark McMillan
Mark McMillan
The McMillan Portfolio
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