7/15/2010 9:12:52 AM

Trade Recommendations:
Take no action.

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:
Long DIA @ $97.00
Long QQQQ @ $42.50
Long SPY @ $102.35

Daily Trading Action

The major index ETFs opened mixed but all of them moved down during the first half hour of trading before beginning a move higher that would last until noon. The bears then took control forcing all the major indexes into negative territory before the bulls began buying in conjunction with the release of the FOMC minutes at 2:15pm EDT. That move was sufficient to see the Dow and S&P-500 close mostly flat, just edging into positive territory. It was also sufficient for the NASDAQ-100 to add on another half of one percent in gains. The Russell-2000 (IWM 63.97 -0.23) wasn't able to fight its way back into positive territory and neither was the Semiconductor Index (SOX 361.86 -0.97). The Bank Index (KBE 24.91 -0.38) and the Regional Bank Index (KRE 24.67 -0.45) both showed losses but contained those losses below two percent giving back less than half of Tuesday's big run higher. The 20+ Yr Bonds (TLT 99.32 +0.99) gained one percent as market participants remain leery about equities. Volume was below average at 1.063B shares traded on the NYSE and with 2.147B shares traded on the NASDAQ.

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

• Retail Sales (Jun) fell -0.5% versus an expected fall of -0.2%
• Retail Sales ex-auto (Jun) fell -0.1% versus an expected flat +0.0% reading
• Export Prices ex-Agriculture (Jun) fell -0.2%
• Import Prices ex-oil (Jun) fell -0.6%
• Business Inventories (May) rose 0.1% versus an expected 0.2% rise

The first four reports were released an hour before the open while the last report was released a half hour into the session. Pre-market trading saw futures react negatively to the news.

In addition to the economic reports, earnings season is in full swing and Intel Corp (INTC 21.36 +0.35) opened five percent higher but finished with a gain of only 1.7%. Intel beat earnings expectations and raised guidance announcing their "best quarter ever". Apparently, some investors sold the news and booked profits.

To complete the information that market participants used to push stock prices all over the place, the Fed Open Market Committee (FOMC) released the minutes from their June 22-23 meeting. The minutes saw the members still willing to maintain the low interest rate environment (0.0-0.25% Fed Funds rate) with the one consistent dissenter, Kansas City President, Thomas Hoenig. They also took down their 2010 GDP forecast modestly, from 3.2-3.7% growth to 3.0-3.5% growth. While unwilling to take additional measures at this time, members agreed to "consider whether further policy stimulus might become appropriate if the outlook were to worsen appreciably." Finally, the expect it could take five to six years for unemployment, output, and inflation to stabilize to more sustainable levels.

Seven out of ten economic sectors in the S&P-500 moved higher led by Tech (+0.8%), Financials (+2.6%). In fact, the bank indexes are leading the markets higher and are in the most bullish of all the equity indexes we regularly monitor.

Implied Volatility rose modestly with the S&P-500 (VIX 24.89 +0.33) implied volatility rising a bit more than one percent and the implied volatility for the NASDAQ-100 (VXN 25.96 +0.59) rising more than two percent.

Commentary:

Wednesday's trading action was on similar volume as Tuesday which is below average for the year but as expected during the summer months. The Dow and S&P-500 are moving in a similar pattern to each other and different than that of the tech-heavy NASDAQ-100.

We continue to monitor the 200-DMAs for the major indexes, along with the closing levels:

Since we are in a trading state, this could be marking a local top but we aren't getting consistent signals for a reversal here. With so much bullishness under the surface, we are reticent to abandon our long positions and will monitoring trading on Thursday to see if the situation is clarified. Thursday and Friday will see JP Morgan Chase (JPM), Bank of America (BAC) and Citigroup (C) report earnings. These announcements could significantly move the market so stay tuned.

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