Daily Trading Activity, BP Suspends 2010 Dividends...

By: Mark_McMillan

Trade Recommendations: Take no action.

Note: We added HOS to the value portfolio at a price of $14.50 per share. HOS closed at $14.28.

Daily Trend Indications:

- Positions indicated as Green are Long positions and those indicated as Red are short positions. - The State of the 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 a position. If the BIAS is Bullish but the 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 trade on "weaker" signals than you might otherwise trade on as the 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.

Current ETF positions are: DIA - Long at $100.46 QQQQ - Long at $45.55 SPY - Long at $108.52

Daily Trading Action

The major index ETFs opened lower and after testing lower in the opening minute or two, leapt higher in the first fifteen minutes of trading, moved sideways for most of an hour then dove down to test the morning lows. That test lower was over shortly after the first our of trading was complete and the major indexes took off higher. The drive higher tired and various indexes hit their zenith with an hour and a half to two hours left in the session. With an hour to go, the bears took the initiative and drove the major indexes into negative territory. The bulls intervened with a half hour left in the session which was sufficient to allow the Dow to close five points higher, the S&P-500 closed fractionally lower, and the NASDAQ closed just positive. The NASDAQ-100, on the other hand, was stronger than the other major indexes and was able to avoid negative territory late in the session when the bears took control. The Russell-2000 (IWM 66.68 -0.31) was unable to achieve a positive close and the Semiconductor Index (SOX 373.09 +1.62) reflected the strength seen in the NASDAQ-100. The Bank Index (KBE 24.74 -0.06) closed in negative territory while the Regional Bank Index (KRE 24.88 +0.04) was able to eek out a positive close. All-in-all, the equity indexes were doing their best to move around and close somewhat close to unchanged. All equity indexes we regularly monitor are in trading states, above their 200-Day Moving Averages, and above their 20-Day Moving Averages. The 20+ Yr Bonds (TLT 97.06 +0.56) moved higher when equities moved lower and never gave up those gains late in the session. Volume remains somewhat light on both the NYSE and NASDAQ.

In addition to the weekly oil inventory report, there were six economic reports of interest released:

• Housing Starts (May) came in at 593K versus an expected 655K
• Building Permits (May) came in at 574K versus an expected 631K
• PPI (May) fell -0.3% versus and expected fall of -0.5%
• Core PPI (May) rose 0.2% versus an expected rise of 0.1%
• Capacity Utilization (May) came in at 74.7% versus an expected 74.7%
• Industrial Production (May) rose 1.2% versus an expected +0.8% rise

The first four reports were released an hour before the open while the latter two were release just fifteen minutes before the session began. On Tuesday, the June Homebuilders Index fell to seventeen from May's reading of 22. Economists had been expecting a level of 21. This didn't hurt the overall markets but the homebuilders were pressured and the bears have added this to their argument that equities won't move higher.

President Obama met with the Chairman and the CEO of BP Plc. Afterwards, Obama gave a seventeen minute speech from the Oval office that expressed a lot of concern and even pointed to the need to wean the United States off of fossil fuels but provided few details. BP announced that it would suspend dividend payments through 2010 including a previously announced dividend that was due to be paid next week.

Three out of ten economic sectors in the S&P-500 moved higher with Utilities (+0.6%), Health Care (+0.3%), and Tech (+0.2%) participating. Financials and Telecom were unchanged and the losers were led by Consumer Discretionary (-0.6%).

Implied Volatility was mixed with the S&P-500 (VIX 25.92 -0.05) implied volatility nearly flat while the implied volatility for the NASDAQ-100 (VXN 25.92 -0.45) fell nearly two percent.

Commentary:

Wednesday's session was all about the bulls testing the market to see if they could move it higher and the bears insisting that now is not the time. The Dow and S&P-500 remain comfortably above their 200-Day Moving Averages. We still expect the bears to make a more significant effort to move these indexes down to test those levels. We will have to be somewhat patient at this juncture.

It should be noted that this coming Friday is a quarterly derivatives expiration day known as quadruple witching. On Friday, single stock futures, stock index futures, stock index options, and stock options will expire. This generally leads to higher volume on that Friday as well as added volatility for the week. In addition to this, it should be noted that the Russell-3000 will be rebalanced the following Friday, June 25th. More than 460 companies will be swapped into and out of the Russell-3000 universe. This will affect trading for the coming two weeks and will result in one of the heaviest trading volume days of the year on Friday, June 25th.

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

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By Mark McMillan

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