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[Chris G]

The McMillan Portfolio
by Mark McMillan
12/4/2013 7:46:16 AM


Another late day sell-off...

Most equity indexes closed lower...



Recommendation: Take no action.




(links are unavailable, but you can find Mark online here:)


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):

In cash as of November 25, 2013.



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Value Portfolio:

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 mixed then traded lower but stabilized in the first half hour and began to move higher. That move lasted into the early part of the lunch hour before the bears once again took control. By the final half hour prices had reached the level of the intraday lows and the bottom fell out in the final half hour with prices dropping rapidly. This left all three major indexes recording fractional losses. The Russell-2000 (IWM 112.37 -1.14) lost one percent while the Semiconductor Index (SOX 519.40 -0.85) posted only a modest loss. The Dow Jones Transports (IYT 129.80 +0.20) managed a modest gain but it was alone in that status. All equity indexes we regularly report on except for the Semiconductor Index maintain their uptrend states. The Semis remain in a trading state. The Finance Sector ETF (XLF 21.47 -0.01), the Bank Index (KBE 32.49 -0.15), and the Regional Bank Index (KRE 39.59 -0.37) all posted fractional losses. All equity indexes we regularly monitor closed above their 20-, 50, and 200-Day Moving Averages (DMAs). Longer term bonds (TLT 103.33 -1.12) lost more than one percent. TLT closed below its 20, 50-, and 200-DMAs and has a BEARISH BIAS. It is in a trading state. Trading volume increased but remained light with 666M shares traded on the NYSE. On the NASDAQ, trading volume doubled to what is a below average 1.654B shares traded.



There were three economic reports of interest released:

ISM Index (Nov) came in at 57.3 versus an expected 55.5
Construction Spending (Sep) fell -0.3% versus an expected +0.4% rise
Construction Spending (Oct) rose +0.8% versus an expected +0.3% rise
All three reports were released a half hour into trading.



Apple (AAPL 551.23 -4.94) fell most of one percent. AAPL constitutes about 20 percent of the NASDAQ-100 and nearly five percent of the S&P-500.



The U.S. dollar rose three tenths of one percent while the Euro fell a like amount.



The yield for the 10-year rose six basis points to close at 2.80. The price of a barrel of crude rose +$1.10 to close at $93.82.



The implied volatility for the S&P-500 (VIX 14.23 +0.53) rose four percent. The implied volatility for the NASDAQ-100 (VXN 14.81 +0.88) rose six percent. Both indicators are just below their respective 200-DMAs and the VIX actually tickled the underside of its 200-DMA before receding a bit.



Market internals were bearish with decliners leading advancers 5:2 on both the NYSE and the NASDAQ. Down volume led up volume 2:1 on the NYSE and by nearly that amount on the NASDAQ. The index put/call ratio fell -0.40 to close at 0.87. The equity put/call ratio rose +0.03 to close at 0.51.



Conclusion/Commentary
Monday saw trading volume increase but remain light to below average. The final half hour sell off followed the same activity on Friday. It has to have a number of market participants concerned but you could not tell that by the decline of the index put/call ratio. With that said, premiums charged for options were hiked again today and we are just below the 200-DMA for those premiums. AAPL pulled back a bit allowing the NASDAQ-100 to finally make a negative close.

We believe the market could be set-up to fail here but we had a similar set-up a bit less than two weeks ago that the bulls stepped in and bought. We are particularly concerned that the index put call ratio declined by -0.40 on a strong sell-off day. This implies some complacency on the part of professional fund managers and the market may finally be ready to give up some ground. We would like to see another day of trading such that the recent uptrend support lines are broken. Stay tuned.


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