Another move higher but most equity indexes…
Dow continues to struggle…
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 $35.00 (Shares were put to us when options expired on June 15, 2012. We were paid $1.10 per share when we sold those options). We have collected significant dividend payments since entering the position.
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
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The major indexes opened higher then moved lower for the first forty-five minutes before beginning a rally that would last through the lunch hour. The pull back that followed was fairly shallow and lasted less than an hour with the final two hours of trading seeing the bulls in control. The Dow closed with a modest loss while the S&P-500 and the NASDAQ-100 were able to post fractional gains. The Bank Index (KBE 34.03 +0.20) and the Regional Bank Index (KRE 41.17 +0.26) both added partial gains and the Finance Sector ETF (XLF 21.96 +0.01) closed flat. The Russell-2000 (IWM 117.21 +0.59) added a fractional gain. The Semiconductor Index (SOX 547.47 +5.97) added more than one percent as did the Dow Jones Transports (IYT 135.16 +1.53). Both also shifted to uptrend states. All equity indexes that we regularly follow are in trading states. All equity indexes we regularly monitor are above their 20-, 50-, and 200-Day Moving Average (DMAs). Longer term bonds (TLT 105.30 -0.26) slipped modestly. It remains above its 20- and 50-DMAs but below its 200-DMA. It shifted to a BULLISH BIAS. It is in an uptrend state. Trading volume was light with 629M shares traded on the NYSE. On the NASDAQ, trading volume was average with 1.993B shares traded.
There was a single economic report released:
- MBA Mortgage Index rose +4.7% last week.
The report was released hours before the open.
We are watching gold for a potential bottom and are looking at entering a long position in the Gold Miners Index (GDX 23.09 -0.61) fell most of three percent as Gold fell about one half of one percent.
Apple (AAPL 551.51 +2.44) rose fractionally. AAPL constitutes about 20 percent of the NASDAQ-100 and nearly five percent of the S&P-500.
The U.S. dollar rose nearly one tenth of one percent while the Euro made a similar move in the opposite direction.
The yield for the 10-year rose three basis points to close at 2.86. The price of a barrel of crude rose +$1.74 to close at $96.73.
The implied volatility for the S&P-500 (VIX 12.84 -0.03) was essentially flat. The implied volatility for the NASDAQ-100 (VXN 14.43 +0.09) rose fractionally. Both the VIX and VXN are well below their respective 200-DMAs.
Market internals were bullish with advancers leading decliners my nearly 2:1 on the NYSE but only 4:3 on the NASDAQ. Up volume led down volume 3:2 on both the NYSE and the NASDAQ. The index put/call ratio rose +0.32 to close at 1.15. The equity put/call ratio fell -0.05 to close at 0.52.
Wednesday was a bullish day overall with the only equity index we regularly monitor that fell being the Dow. Financials, however, were relatively unchanged (except for the banks). The market continues to record to new highs, in terms of the the Russell-2000, the Dow Jones Transports, and the bank indexes. We are now looking for the pause that refreshes to come about with all equity indexes likely taking a modest hit before being able to move higher. This is healthy for the market and we will re-look at our positions after trading on Thursday. We will remain long at this time.
We hope you have enjoyed this edition of the McMillan portfolio. You may send comments to email@example.com.