Optimism Fades a Bit...
11/30/2011 7:57:44 AM
Market ends with split finish....
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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.
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Daily Trading Action
The major indexes opened mixed then rallied for most of the first hour of trading. From there, it was a gradual move lower or sideways at best as the NASDAQ-100 moved from positive to a negative close. The S&P-500 ended up closing at the same level as its higher open and the Dow closed higher than its higher open. Gains were fractional as was the loss posted by the NASDAQ-100. The semiconductor index (SOX 352.62 -2.55) posted a fractional loss as did the Russell 2000 (IWM 69.66 -0.13). The Dow Jones Transport Index (IYT 84.19 +0.36) posted a fractional gain. The Bank index (KBE 18.02 -0.07) posted a fractional loss as did the Regional Bank Index (KRE 21.98 -0.08). The Finance Sector ETF (XLF 12.07 -0.06) also posted a fractional loss. Only the Dow, Regional Bank Index, and Dow Jones Transports retain a BULLISH BIAS. The NASDAQ-100 and Bank Index have a BEARISH BIAS while the other equity indexes have a neutral BIAS but have warned of a shift to a BEARISH BIAS. The NASDAQ-100 and Bank Index are also in downtrend states with the other equity indexes in trading states. The Dow, Regional Bank Index, and Dow Jones Transport Index closed above their respective 50-Day Moving Averages (DMAs). Long term bonds (TLT 119.75 -0.99) posted a large fractional loss. It remains in an uptrend state and retains its BULLISH BIAS. Trading volume was light on both the NYSE and the NASDAQ.
There were three economic reports released:
- Case Shiller 20-City Index (Sep) fell -3.6% versus an expected -3.0% decline
- Consumer Confidence (Nov) rose to 56.0 versus an expected 42.5
- FHFA Housing Price Index (Sep) rose +0.9% versus August's -0.1% decline
The first report was released a half hour before the open while the other two reports were released a half hour into the session.
American Airlines parent company AMR Corp (AMR 0.26 -1.36) filed for bankruptcy protection. This should was quite a negative for shareholders but the Dow Jones transport index closed higher. The main stage continues to be occupied by Europe as European finance ministers try to forge a tighter fiscal union where all countries have to be more disciplined in following their budgets.
The U.S. dollar fell nearly another four tenths of one percent.
Seven out of ten economic sectors in the S&P-500 moved higher led by Energy +1.5% and including Utilities +1.1%, Consumer Staples +1.0%, Telecom +0.7%, Health Care +0.4%, Consumer Discretionary +0.2%, and Materials +0.2%. Laggards included Industrials -0.1%, Financials -0.6%, and Tech -0.7%.
The yield for the 10-year note rose four basis points to close at 2.00. The price of the near term futures contract for a barrel of crude oil rose $1.58 to close at $99.79.
Implied volatility for the S&P-500 (VIX 30.64 -1.49) fell nearly five percent and the implied volatility for the NASDAQ-100 (VXN 31.06 -0.50) fell more than one percent.
Market internals were negative with decliners edging advancers on the NYSE and with decliners leading advancers 5:3 on the the NASDAQ. Down volume edged up volume on the NYSE and down volume led up volume nearly 3:2 on the NASDAQ. The index put/call ratio rose 0.23 to close at 1.40. The equity put/call ratio fell -0.02 to close at 0.63.
Conclusion/Commentary
Tuesday was a riposte following Monday's parry of the bear slide seen in the prior week. The question remains how far the bulls can push back against the bears?
Market internals were negative and with the NASDAQ-100, semiconductor index, and bank index all in downtrend states, there is a lot of downward pressure in the short term. In addition, the shift to a BEARISH BIAS by the NASDAQ-100 and Bank Index suggests a longer term shift as well. Volume was again light.
We continue to monitor potential topping action for longer-term bonds and the U.S. dollar. If these occur, this tilts U.S. equity markets in favor of the bulls. We are concerned about the recent change in some equity indexes to a bearish bias and we will give the equity indexes that shifted to downtrend states just one more day to shift back into trading states.
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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