The stock market is shooting back and forth like a futures contract. In any case, the 1330 level on $SPX remains our bullish demarcation line. A close below there would turn us bearish.
Equity-only put-call ratios had generated sell signals a couple of weeks ago, but those may be fading.
Last week, breadth indicators had generated sell signals. But positive breadth for a few days moved breadth back to a neutral status.
By Lawrence G. McMillan
$SPX has pulled back to the critical support area at 1330-1340. It's one thing to say that an overbought market might have such a correction, but it's quite another to experience one. If $SPX closes below 1330, that would turn the chart negative.
Nearly all the other indicators that we follow have already turned bearish, which makes things much more negative. Breadth indicators registered sell signals.
The equity-only put-call ratios have generated sell signals as well.
By Lawrence G. McMillan
The market broke out to new 2011 highs this week. Some of these indices are actually making new all-time highs, having exceeded their 2007 peaks. The chart of $SPX now has a new bull market trend line, connecting the August and March lows. The breakout over the old highs in the 1340 area could measure targets to nearly 1400 on this move.
Equity-only put-call ratios have remained on buy signals for some time now.
Breadth has been strong of late, and both breadth indicators are in overbought territory.
By Lawrence G. McMillan
After a severe scare on Monday, which I label the "Emperor has no clothes" decline, the market has responded well, due in large part to some positive earnings report. Now the problem -- if there is one -- is the resistance from the February and April tops in the 1340-1345 area. Another failure at this level would be quite bearish.
Equity-only put-call ratios have remained bullish, even with the selling that occurred last week.
By Lawrence. G. McMillan
$SPX touched support and its rising 20-day moving average at 1310, and probed slightly below that level today before rallying.
Perhaps more interesting is the fact that the equity-only put-call ratios have remained on buy signals throughout the pullback over the last week.
There was similar action in the volatility indices ($VIX and $VXO). The calm in these volatility indices is another bullish indication, despite the falling broad market.
Only breadth is giving a negative signal at this time.
The market has spent nearly the entire week in a tight range, frustruating both bulls and bears.
Equity-only put-call ratios have continued to remain on buy signals, despite some occasional heavy put buying during the week.
Market breadth has been strong, for the most part. As a result, breadth remains on a buy signal, too.
Volatility indices ($VIX and $VXO) have drifted down to very low levels. In general, the decline in volatity is bullish for stocks.
$SPX has not made new highs (yet), but it has broken out above the 20-day moving average, the downtrend line from the highs, and the short-term resistance that had developed in the 1300-1320 area.
Equity-only put-call ratios have rolled back over to buy signals, which is a very significant positive intermediate-term development.
Breadth oscillators -- which are the most sensitive indicator of this group -- turned to buy signals over a week ago, and have remained on those buy signals ever since.
The following Market Commentary is an abbreviated version of the commentary featured in The Option Strategist Newsletter.
$SPX fell rather sharply in the days after it made a new high on November 5th, the day of the post-FOMC meeting euphoria. As a result, there is major resistance in the general area of 1220.
The equity-only put-call ratios are once again at odds with each other. The weighted ratio is still the one upon which are putting the most weight, and it is on a sell signal.
The breadth indicators have returned to buy signals.
