Traders be on the look out for a top forming this week. This is one of our 300 market timing indicators to help traders and investors identify potential buy and sell points.

Stock Market Timing

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Nasdaq Cumulative Breadth

Santa Claus rally in effect…

The first official day of Santa Claus rally sees bulls in charge…

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

Click here to learn more about my services and for our ETF Trend Trading.

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 flat to modestly higher.  It was a holiday shortened session with the lightest trading volume of the year.  The Major indexes all ended with fractional gains on the modest side.   The Russell-2000 (IWM 115.22 +0.44), the Semiconductor Index (SOX 528.35 +1.70), and the Dow Jones Transports (IYT 130.92 +0.47) were all able to post fractional gains.  The Bank Index (KBE 33.18 +0.06), regional Bank Index (KRE 40.75 -0.02)), and the Finance Sector ETF (XLF 21.75 +0.04) had mixed results but not far off of finishing flat.  All equity indexes closed above their 20, 50-, and 200-Day Moving Averages (DMAs).  Longer term bonds (TLT 102.83 -0.83) fell back below its 20-DMA and remains below its 50- and 200-DMAs.  It has a BEARISH BIAS and remains in a trading state.  Trading volume was ultra light due to the holiday shortened session with 272M shares traded on the NYSE.  On the NASDAQ, trading volume was also ultra light with 800M shares traded.

There were five economic reports of interest released:

  • MBA Mortgage Index for last week fell -6.2%
  • Durable Goods Orders (Nov) rose +3.5% versus an expected +2.2% rise
  • Durable Orders ex-transportation (Nov) rose +1.2% versus an expected +0.6% rise
  • FHFA Housing Price Index (Oct) rose +0.5%
  • New Home Sales (Nov) came in at 464K versus an expected 433K

The first four reports were released a half hour or more before the open.  The last report came out a half hour into the session.

Apple (AAPL 567.67 -2.42) fell fractionally.  AAPL constitutes about 20 percent of the NASDAQ-100 and nearly five percent of the S&P-500.

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

The yield for the 10-year rose five basis points to close at 2.98.  The price of a barrel of crude rose thirty-one cents to close at $99.22.

The implied volatility for the S&P-500 (VIX 12.48 -0.56) fell four percent.  The implied volatility for the NASDAQ-100 (VXN 13.91 -0.20) fell 1.5 percent.  Both closed below their respective 200-DMAs.

Market internals were bullish with advancers leading decliners 2:1 on the NYSE and by 8:5 on the NASDAQ.  Up volume led down volume 3:1 on both the NYSE and the NASDAQ.  The index put/call ratio fell -0.10to close at 0.64.  The equity put/call ratio fell -0.03 to close at 0.46.

Conclusion/Commentary

Tuesday saw the lightest trading volume of the year with the Dow climbing sixty-three points as the standout among the major indexes.  Tuesday marked the first official day of the Santa Claus rally which starts with the last five trading days of the year and ends on the second trading day of the new year.  We remain long at this time.

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

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