Russian Saber Rattling...

By: Mark McMillan | Mon, Apr 28, 2014
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4/28/2014 9:05:19 AM

Russian Saber Rattling...
Will there be war?

Recommendation: Take no action.

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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: 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.

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The NASDAQ-100 lost most of two percent with many leading indexes losing two percent or more. Longer Term Bonds (TLT 111.33 +0.16) was nearly unchanged but remains elevated. Trading volume remained light with 675M shares traded on the NYSE. Trading volume on the NASDAQ dropped to average with 2.070B shares traded.

There was a single economic report of interest released:

The report was released twenty-five minutes after the open.

We are watching gold for a potential reversal in the Gold Miners Index (GDX 24.46 +0.53) added two percent and Gold (GLD 125.43 +0.87) added a fractional gain to close above its 20-DMA and even with its 200-DMA.

Apple (AAPL 571.94 +4.17) added most of one percent. AAPL constitutes about 20 percent of the NASDAQ-100 and nearly five percent of the S&P-500.

Seadrill Limited (SDRL 34.77 +0.51) bucked the bearish market moves and added 1.5%. It now trades above its 20- and 50-DMAs. It is still below its 200-DMA and is in a trading state. 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 unchanged and the Euro was nearly unchanged as well.

The yield for the 10-year fell two basis points to close at 2.67. The price of a barrel of crude oil fell -$1.34 to close at $100.60.

The implied volatility for the S&P-500 (VIX 14.06 +0.74) rose nearly six percent and remains barely below its 20-, 50, and 200-DMAs. Implied volatility for the NASDAQ-100 (VXN 18.59 +1.42) 7.17 +0.27) rose eight percent and remains well above its 200-DMA and just below its 20-DMA.

Market internals were bearish with decliners leading advancers 2:1on the NYSE and by 5:1 on the NASDAQ. Down volume led up volume 3:1 on the NYSE and by 5:1 on the NASDAQ. The index put/call ratio rose +0.18 to close at 1.30. The equity put/call ratio rose +0.10 to close at 0.71.


Conclusion/Commentary

Friday saw volume lighten up. The norm for a Friday is at least slightly heavier volume, due to weekly options expiration. High beta equities tumbled more than one percent while the Down and S&P-500 saw losses of most of one percent. With the leading indexes dropping like rocks, caution should be exercised. With that said, the volume was light enough that it seemed more like traders being cautious than market participants pulling out of positions. There were continued worries over Russian sabre rattling with Ukraine. The U.S. and its Western European countries continue to look at implementation of further sanctions on Russia, and in particular, at how they can hurt Putin's closest allies economically. We shall see if the threats to the Russian economy and the collapse of wealth among Putin supporters will be enough to dissuade Mr. Putin from his choice of military conflict with Ukraine. Let's hope that the Russian capitalists win out over the communists and the Russians back away from the brink of war. We remain long as we monitor trading on Monday.

We hope you have enjoyed this edition of the McMillan portfolio. You may send comments to mark@stockbarometer.com.

 


 

Mark McMillan

Author: Mark McMillan

Mark McMillan
The McMillan Portfolio

Mark McMillan

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