Gap Up Open Results in Positive Close...
3/26/2014 9:01:26 AM
Was that the tipping point?
Recommendation: Take no action.
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 QQQ at $85.99 as of December 19, 2013
Long SPY at $181.19 as of December 19, 2013
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: 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 = $5.28 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.
The major indexes opened higher and continued higher for the first half hour before the selling began. The bulls stepped in before prices could challenge Monday's lows and kept buying for the most part into the close. This left the major indexes with fractional gains where the Dow and S&P-500 closed around where they opened but the NASDAQ-100 stopped short of that mark. The NASDAQ-100 closed back above its 50-Day Moving Average (DMA) but below its 20-DMA. All equity indexes we regularly report on are in trading states except the Semiconductor Index (SOX 584.33 +4.48), the Bank Index (KBE 34.22 -0.04), the Regional Bank Index (KRE 41.82 -0.03), and the Finance Sector ETF (XLF 22.37 -0.02) which are in uptrend states. The Russell-2000 (IWM 116.93 -0.03) closed flat after accounting for the thirty cent dividend. It remains below its 20-DMA. The Dow Jones Transports (IYT 135.03 +0.79) posted a fractional gain. All equity indexes we monitor have a BULLISH BIAS. Except for the NASDAQ-100 and the Russell-2000, all equity indexes that we regularly monitor closed above their 20-, 50-, and 200-DMAs. Longer term bonds (TLT 108.59 -0.41) posted a fractional loss and remains above its 20-, 50-, and 200-DMAs. It has a BULLISH BIAS and shifted to an uptrend state. Trading volume was light with 645M shares traded on the NYSE. Trading volume on the NASDAQ was heavy with 2.247B shares traded.
There were four economic reports of interest released:
- Case-Shiller 20-City Index (Jan) came in at 13.2% versus an expected 13.3%
- FHFA Housing Price Index (Jan) rose +0.5% versus December's +0.7% rise
- Consumer Confidence (Mar ) came in at 82.3 versus an expected 78.2
- New Home Sales (Feb) came in at 440K versus an expected 445K
The first two were released a half hour before the open while the other two came out a half hour into trading. Note that FHFA Housing Price Index for December was revised down from +0.8%. Are these cracks in housing's façade?
We are watching gold for a potential reversal in the Gold Miners Index (GDX 24.48 +0.15) rose fractionally as did the price of gold.
Apple (AAPL 544.99 +5.80) added more than one percent. AAPL constitutes about 20 percent of the NASDAQ-100 and nearly five percent of the S&P-500.
Seadrill Limited (SDRL 34.43 +0.44) added more than one percent but has not yet moved above its 20-DMA. We believe the stock has bottomed but it will likely take a challenge of the recent lows to cement the bottom. We sold March 2014 $35.00 put contracts for $150 at the open on Feb 18th and bought shares at $35.43. The stock is now trading ex-dividend for $0.98. 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 was little changed as was the Euro.
The yield for the 10-year rose one basis point to close at 2.74. The price of a barrel of crude oil lost forty-one cents to close at $99.19.
The implied volatility for the S&P-500 (VIX 14.02 -1.07) plummeted seven percent. 5.09 +0.09) closed relatively flat. Implied volatility for the NASDAQ-100 (VXN 17.12 -1.00) slipped five percent. The VIX closed below its 200-DMA while the VXN is still above its 200-DMA.
Market internals were bullish with advancers leading decliners 7:5 on the NYSE and by a narrow margin on the NASDAQ. Up volume led down volume 3:2 on the NYSE and by 5:4 on the NASDAQ. The index put/call ratio fell -0.59 to close at 0.86. The equity put/call ratio fell -0.13 to close at 0.53.
Tuesday saw the bulls bidding prices to a higher open and the bears attacked after waiting just one half hour into the session. The attack was fierce forcing prices into negative territory for some equity indexes but the bulls met the challenge before the bears could reach Monday's lows and continued buying into the close. From a technical perspective, this is bullish although volume was lighter than we have seen on selling days. This consolidation/sell off has lasted three weeks and it appears that the bulls are readying to challenge recent highs yet again. For most indexes, those will be multi-year highs. For the Dow, this is a challenge of the March 7th intraday high before a challenge to the closing high for 2013 can be made. We will remain long our current positions.
We hope you have enjoyed this edition of the McMillan portfolio. You may send comments to firstname.lastname@example.org.
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