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New Highs for Dow and SP-500 While Bank Indexes Back Above 200-DMAs...

By: Mark McMillan | Tuesday, June 3, 2014

6/3/2014 9:01:53 AM

Warning signs too...

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Stock Market Trends:

Stock Market Trends Table

- 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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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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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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Equities opened higher and immediately traded lower. After less than forty-five minutes the bulls arrested the slide but the bears continued to attack for another hour before the markets started moving up in earnest. The buying slackened in the final forty-five minutes but the Dow and S&P-500 managed fractional gains and achieved new all-time closing highs. The NASDAQ-100 was not able to match their performance and posted a modest loss of less than four points. All three remain above their 20-, 50-, and 200-Day Moving Averages (DMAs). The Dow shifted to an uptrend state joining the NASDAQ-100 and S&P-500. The Dow Jones Transports (IYT 146.12 +0.81) posted a fractional gain as did the Semiconductor Index (SOX 602.84 +3.26). Both remain above their 20-, 50- and 200-DMAs in uptrend states. The Russell-2000 (IWM 112.25 -0.61) posted a fractional loss closing below its 50-DMA but above its 20-, and 200-DMAs. The Bank Index (KBE 32.22 +0.29) added nearly one percent and the Regional Bank Index (KRE 38.73 +0.54) added more than one percent. Both closed below their respective 50-DMAs but above their 20- and 200-DMAs. All three remain in trading states. The Finance Sector ETF (XLF 22.35 +0.06) added a fractional gain and remains above its 20, 50-, and 200-DMAs in an uptrend state. Longer Term Bonds (TLT 112.96 -0.15) paid a ninety-four cent dividend and posted a modest loss after accounting for the dividend. It closed above its 20-, 50- and 200-DMAs and shifted to a trading state.. Trading volume was light with 549M shares traded on the NYSE. Trading volume on the NASDAQ was light with 1.620B shares traded.

There were two economic reports of interest released:

Both reports were released a half hour into the session.

We are watching gold for a potential reversal in the Gold Miners Index (GDX 22.29 -0.21) fell nearly one percent as the price of Gold (GLD 119.70 -0.73) fell fractionally. Both closed below their 20-, 50-, and 200-DMAs.

Apple (AAPL 628.65 -4.35) posted a fractional loss. AAPL constitutes about 20 percent of the NASDAQ-100 and nearly five percent of the S&P-500.

Seadrill Limited (SDRL 38.44 +0.44) added more than one percent. It is in an uptrend 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 rose four tenths of one percent while the Euro fell a quarter of one percent.

The yield for the 10-year treasuries rose seven basis points to close at 2.53. The price of a barrel of crude oil fell twenty-four cents to close at $102.47.

The implied volatility for the S&P-500 (VIX 11.58 +0.18) rose one percent but remains well below its 200-DMA. The implied volatility for the NASDAQ-100 (VXN 14.33 +0.56) rose four percent but remains well below its 200-DMA.

Market internals were mixed with decliners leading advancers 11:10 on the NYSE and by 5:3 on the NASDAQ. Up volume led down volume 9:8 on the NYSE while down volume led up volume by nearly 5:4 on the NASDAQ. The index put/call ratio rose +0.18 to close at 1.17. The equity put/call ratio rose +0.06 to close at 0.62.


Conclusion/Commentary

Monday looked bullish on the surface. In particular the move by the bank indexes to close back atop their 200-DMAs is a good start for the bulls to try to shift the bearish mindset which holds the market. On the other hand, the NASDAQ-100 was not able to post a gain and the Russell-2000 gave back some of its gains but remains above the 200-DMA. Equities are overbought and are vulnerable to a pull back but we will remain long equities until we actually have an indication that a sell-off is a high probability and will be a meaningful move.

 


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

 

Author: Mark McMillan

Mark McMillan
The McMillan Portfolio

Mark McMillan

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