Bulls Step Up to Buy on Light Trading Volume...
6/16/2014 9:00:05 AM
Progress from here is in doubt...
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 QQQ at $85.99 as of December 19, 2013
Long SPY at $181.19 as of December 19, 2013
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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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Equities saw a gap up open that resulted in fractional gains for the major
indexes by the close as prices didn't close far from their open levels. The Dow
Jones Transports (IYT 144.39 +1.14) added most of one percent to close
even with its 20-DMA. The Semiconductor Index (SOX 627.48 +6.13) to
standout as the strongest of all equity indexes we regularly monitor and is
the only equity index we track to be in an uptrend state. The Russell-2000 (IWM
115.59 +0.20) added a modest gain. The Bank Index (KBE 33.07 -0.04)
and the Regional Bank Index (KRE 39.83 -0.10) posted fractional losses
and shifted to trading states. The Finance Sector ETF (XLF 22.61 +0.01)
closed flat. With the exception of the transports, all equity indexes are currently
trading above their 20-, 50-, and 200-Day Moving Averages (DMAs) and all have
a BULLISH BIAS. Longer Term Bonds (TLT 112.15 -0.06) closed flat to
close not far below its 20-DMA and above its 50- and 200-DMAs. It maintains
a trading state but has indicated a possible change to a BEARISH BIAS. Trading
volume decreased to a very light 543M shares traded on the NYSE. Trading
volume on the NASDAQ also decreased to a light 1.731B shares traded.
There were three economic reports of interest released:
- PPI (May) fell -0.2% versus an expected +0.2% rise
- Core PPI (May) fell -0.1% versus an expected +0.1% rise
- UofMichigan Consumer Sentiment (Jun) came in at 81.2 versus an expected 82.9
The first two reports were released an hour before the open. The final report came out twenty-five minutes into trading.
We are watching gold for a potential reversal in the Gold Miners Index (GDX 24.11 +0.08) added a fractional gain to close even with its 200-DMA as the price of Gold (GLD 122.96 +0.32) added a modest gain and closed above its 20-DMA.
Apple (AAPL 91.28 -1.01) slipped a bit 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 39.42 +0.62) added more than one percent to close just below its 200-DMA. It has regained all but thirteen cents of its recent high, and just paid a one dollar dividend so has really just achieved a new multi-month high. It is in an uptrend state. 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 $0.98 and one dollar for total dividends issued of $1.98. The stock fell back to just below its 200-DMA. 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 closed flat below its 200-DMA. The Euro fell two tenths of one percent and closed well below its 200-DMA.
The yield for the 10-year treasuries rose a basis point to close at 2.60. The price of a barrel of crude oil rose thirty-eight cents to close at $106.91.
The implied volatility for the S&P-500 (VIX 12.18 -0.38) fell three percent. The implied volatility for the NASDAQ-100 (VXN 13.61 -0.24) fell most of two percent. Both remain below their 200-DMAs.
Market internals were bullish. Advancers led decliners 4:3 on the NYSE and by a narrow margin on the NASDAQ. Up volume led down volume 2:1 on both the NYSE and the NASDAQ. The index put/call ratio fell -0.08 to close at 0.67. The equity put/call ratio rose +0.05 to close at 0.56.
For the most part, equities added modest gains and the transports regained their 20-DMA. The exception was the financial sector which closed flat and the two bank indexes which closed modestly lower. With all equity indexes that we regularly monitor now in trading states (with the exception of the uptrending semiconductor index), caution is warranted. We will remain long, for now. It may be that the bulls will lose their resolve soon and then we might finally shift to net short.
We hope you have enjoyed this edition of the McMillan portfolio. You may send comments to email@example.com.