Blogs

A Rare, But Often Effective, Early Warning Sell Signal (Preview)

By Lawrence G. McMillan

This is something that we’ve written about twice before – first in 2011 (Volume 20, No. 16) and later in 2013 (Volume 22, No. 15).  In short, one measures the advance in the $SPX Index over a 494-day span (trading days).  If it has risen 50% or more over that time, it is a major overbought warning.  However, to use it effectively as a timing tool is difficult, for the market can continue to advance (five times since 1950, the advance has reached 70% in that time period – of which four were relatively major tops).  Moreover, there can be long periods of time (weeks or maybe even a couple of months) where the measure flits above 50%, then below, then above, etc.

Weekly Stock Market Commentary 1/26/2018

By Lawrence G. McMillan

The superlatives that are being used to describe this market are well-deserved. $SPX has advanced so fast that there really isn't any support, unless you want to declare the low of the "half-day" correction at 2825 a minor support area. The one clearly defined support area is the 2680-2700 area that was formed in late December and from which this January rally was launched.

Call buyers are making money in this market, and they are piling in with a vengeance now. The equity-only put-call ratios are dropping even more rapidly than they previously were. That makes them overbought, but they are on buy signals.

Barclays’ Announces Launch of new ETNs: VXXB and VXZB

By Lawrence G. McMillan

Before you get too excited about a new volatility product, let me explain that the two new ETN’s – short-term volatility (VXXB) and intermediate-term volatility (VXZB) are merely the eventual replacements for VXX and VXZ. The latter two (VXX and VXZ) have a maturity date of January 30, 2019 – ten years after they were introduced. These two new issues will replace them. So, for now, the new issues are trading with a “B” at the end of their symbol. When VXX and VXZ mature in about one year, these two new ones will remove the “B” from their symbol and will trade as usual.

Weekly Stock Market Commentary 1/19/2018

By Lawrence G. McMillan

Stocks continue to advance at a rapid rate. Despite one half day of correction (down 40 points from high to low on Tuesday), $SPX has closed at new all-time highs on three of the last five days. There is now minor support at 2770 -- the low of the half-day correction that took place.

Equity-only put-call ratios continue to make new multi-year lows. The standard ratio hasn't been this low since the summer of 2014, and the weighted ratio hasn't been this low since the spring of 2010. For now, they are overbought but not yet on sell signals.

Don't Abandon Your Protection

By Lawrence G. McMillan

Last week, there was an article in the Wall Street Journal, saying that investors who have been buying protection are going to stop doing so, because of the losses incurred from buying the protection.  That line of thinking was thankfully countered in this week’s Striking Price column in Barron’s, where it was pointed out that many large investors want protection as insurance in case something unforeseen occurs.  I wrote an article yesterday for Moneyshow, and had this comment on the situation:

Weekly Stock Market Commentary 1/12/2018

By Lawrence G. McMillan

The chart of $SPX could not be more bullish. It is in a strong uptrend, well above all of its meaningful trailing moving averages, and continually making new all-time highs. Other indices are in similar shape, as far as making new all-time highs, but $SPX has the strongest chart of them all, going back to the election in November 2016. That's when this monster rally was launched, and it's still in full force.

There are now six unfilled gaps on the $SPX chart. I have marked them with horizontal purple lines on the chart in Figure 1.

CBOE Launches Volatility Product Microsite

By Lawrence G. McMillan

The CBOE has launched a microsite within the CBOE website that has information about all of the volatility-based Exchange Traded Products (ETPs).  The website is located at http://www.cboe.com/voletps.

VXX and XIV are two of the most liquid and popular ETPs (both are Exchange-Traded Notes), but there are many others.

There’s quite a bit of information on the site, so one can spend a while there attempting to absorb it all.  One useful section – especially for those not familiar with these ETPs is the FAQ (Frequently Asked Questions) section, where things like “roll cost” (the daily decay of long volatility products, like VXX) are explained.

The Post-Thanksgiving Seasonal Recap

By Lawrence G. McMillan

The post-Thanksgiving seasonally bullish period ended at the close of trading on January 3rd.  This period is a combination of three different seasonal patterns, which began at the close of trading on November 22nd (post-Thanksgiving, January effect, and Santa Claus rally). $SPX advanced 116 points, or 4.5% over that time period.  One component of our research indicates that it is usually best to be in the small-caps during this period.  However, this year the Russell 2000 ($RUT) only advanced 36 points, or 2.4%.  IWM advanced by 3.56 points, also 2.4%.  So this year it would have been better to be in $SPX all the way along, rather than in the Russell. 

Weekly Stock Market Commentary 1/5/2018

By Lawrence G. McMillan

The market blasted into the new year with a strong rally that has dominated the first three days of trading. The strength of this move is evident in the fact that on both January 3rd and 4th, $SPX gapped to new all-time highs. We have mentioned several times in the past how impressive this market has been with upside gaps to new highs over the past year. Thus, the $SPX chart remains bullish.

Equity-only put-call ratios had rolled over to sell signals almost two weeks ago. But now these averages are curling back down again. Technically, both ratios are still on sell signals, but those sell signals are certainly in jeopardy at this time.

Weekly Stock Market Commentary 12/29/17

By Lawrence G. McMillan

$SPX remains in a strong uptrend, with all averages rising on its chart. It is going to close out the year well above its rising 20-day moving average -- a moving average that it has touched only once in the last four months. You can't find an uptrend much better than that.

The equity-only put-call ratios had been in a more or less steady decline during this last month, as call buying has reached extremes. Now they have begun to rise from those multi-year lows, generating sell signals.

Trading or investing whether on margin or otherwise carries a high level of risk, and may not be suitable for all persons. Leverage can work against you as well as for you. Before deciding to trade or invest you should carefully consider your investment objectives, level of experience, and ability to tolerate risk. The possibility exists that you could sustain a loss of some or all of your initial investment or even more than your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and investing, and seek advice from an independent financial advisor if you have any doubts. Past performance is not necessarily indicative of future results.
Visit the Disclosure & Policies page for full website disclosures.