7/14/2014 9:01:45 AM

Earnings season continues with the bulls buying modestly...

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Best ETFs to buy now (current positions):

Long DIA at $161.48 as of December 19, 2013
Long SPY at $181.19 as of December 19, 2013

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Value Portfolio:

Long SDRL at $33.90 on June 15, 2012 (Shares were put to us when options expired. We were paid $1.10 per share when we sold those options and bought shares for $35.00 each.) We have collected dividends: June 10, 2014 $1.00, March 5, 2014 $0.98, December 3, 2013 $0.95, September 5, 2013 $0.91, June 5, 2013 $0.88, $1.70 Dec 4, 2012, $0.84 Sep 4, 2012. Total = $6.28 in dividend payments.
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
Long SDRL at $35.43 on Feb 18, 2014
Long SDRL at $33.50 on March 21, 2014 (Shares were put to us when options expired. We were paid $1.50 per share when we sold those options and bought the shares for $35.00 each.) We have collected dividends: June 10, 2014 $1.00.

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The long and short of it is that equities closed fractionally higher, for the most part on Friday. The three canaries, the Russell-2000 (IWM 115.10 -0.15), the Bank Index (KBE 32.92 -0.08), and the Regional Bank Index (KRE 39.73 -0.06) were the only equity indexes, we regularly monitor, to close lower. They are also the only ones below their 20-Day Moving Averages (DMAs). All equity indexes we regularly monitor closed above their 50- and 200-DMAs and all are in trading state with a BULLISH BIAS. Longer Term Bonds (TLT 113.58 +0.72) closed higher and shifted to an uptrend state with a BULLISH BIAS. It remains above its 20-, 50-, and 200-DMAs. Trading volume continued to be light with 524M shares traded on the NYSE. Trading volume on the NASDAQ was also light with 1.498B shares traded.

There was a single economic report of interest released:

• Treasury Budget (Jun) came in at $70.5B versus an expected $75.0B

The report was released with two hours remaining in the session.

Apple (AAPL 95.22 +0.18) posted a fractional gain. AAPL constitutes about 20 percent of the NASDAQ-100 and nearly five percent of the S&P-500.

Seadrill Limited (SDRL 37.71 -0.39) fell one percent. It remains below its 200-DMA. The next target above remains $40.96, it's closing price on the last trading day of 2013. It is in an trading state. We sold March 2014 $35.00 put contracts for $150 at the open on Feb 18th, 2014 and bought shares at $35.43. The stock is now trading ex-dividend for $0.98 and one dollar for total dividends issued of $1.98. The shares were put to us at $35.00 less the $1.50 per share we were paid for the puts, so we have an effective price of $33.50.

The U.S. dollar and the Euro were essentially flat. The dollar continues to trade below its 200-DMA while the Euro failed to break up through its 200-DMA.

The yield for the 10-year treasuries fell a single basis point to close at 2.52. The price of a barrel of crude oil fell -$2.10 to close at $100.83.

The implied volatility for the S&P-500 (VIX 12.08 -0.51) fell four percent. The implied volatility for the NASDAQ-100 (VXN 13.66 -0.47) fell three percent.

Market internals were bullish to neutral. Advancers led decliners 5:4 on the NYSE and were pretty much dead even on the NASDAQ. Up volume led down volume by a narrow margin on the NYSE and by 5:4 on the NASDAQ. The index put/call ratio rose +0.21 to close at 1.27. The equity put/call ratio fell -0.13 to close at 0.54.

Conclusion/Commentary

We remain cautiously optimistic about the bulls ability to control market action during the seasonally bullish earnings season. While the canaries continue to provide a cautionary tale, other equity indexes are able to move modestly higher. We will remain long DIA and SPY and look for an opportunity to enter a trade on QQQ in the near future.

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