Buy signals have abounded in the past week. In Figure 1, I have included Tuesday's night's action (vertical red line), as the market first plunged when it became a distinct possibility that Donald Trump would win the election. This was a very "Brexit-like" response to a surprise vote.
I used to think "weatherman" was the main occupation where you could be wrong constantly and still keep your job. Now I'm going to add "pollster" to that list.
Trump has won, but the world is not coming to an end. Futures plunged overnight – at one point touching limit down = 107 points! But prices have completely recovered, and futures were trading on the plus side just moments ago. Prices are still swinging around rather rapidly, but in general volatility is deceasing, and more buy signals are coming to fruition.
The chart of $SPX (Standard & Poors 500) continues to have a slightly negative bias to it. There is a clear series of lower highs on the chart. Moreover, the trend line from the January lows has been broken.
Equity-only put-call ratios are both technically on sell signals at this time, according to the computer programs that we use to analyze these charts. However, to the naked eye, they are more or less moving sideways.
Stocks appear to be struggling a bit, but there hasn't been a decisive breakdown. The $SPX chart shows some negative trend lines, but the important area is support at 2120. As long as that holds, the bulls will remain in charge.
This week, $SPX finally tried to break down. But support held at or near 2120, reinforcing that as a major support area. So that remains a key level the level at which the $SPX chart would turn bearish, if broken.
Equity-only put-call ratios are not buying into the bearish argument just yet. They are both moving lower on their charts, which maintains their buy signals.
Stock prices have dampened down into a very narrow trading range again. There is major support at 2120 and major resistance at the old highs (2195). A breakout from those levels would be significant.
Stocks have tried to find a catalyst to spur them in one direction or the other, but they have been unable to do so. $SPX is locked into the 2120 - 2195 trading range. A clear breakout in either direction should be respected.
