By Lawrence G. McMillan
The stock market, as measured by the S&P 500 Index, has had an impressive year so far. A strong month of January wound up with the typical seasonal buy programs which have spilled over into February (as they often do).
But the overbought conditions have continued to grow, without being properly alleviated. Thus, the odds of a short-term correction are high, especially as January disappears in the rear view mirror.
By Lawrence G. McMillan
MORRISTOWN, N.J. (MarketWatch) — The bulls have been completely in charge. While there may be some short-term victories ahead for the bears, it appears the bulls are not finished yet.
By Lawrence G. McMillan
There have only been four down days in January, and as a result the market is very overbought. The intermediate-term indicators are mostly still positive at this time, although there is one glaring exception -- a new sell signal (just registered today) from the standard equity-only put-call ratio.
Other intermediate-term indicators remain positive, though. For example, $SPX is still clearly in an uptrend. However, if the 1260 level were breached, that would be much more bearish.
By Lawrence G. McMillan
Friday was another boring market day, with $SPX in a 6-point range. The reality of the situation seems to have struck $VIX traders, though, as that index lost another 8% on Friday. The downward trend of $VIX is bullish for stocks, but this is beginning to look a big overdone. I would have to say that $VIX at 18 (and $VXO below 17) is certainly in overbought territory.
By Lawrence G. McMillan
The stock market continues its slow steady march upward. The $SPX chart is becoming stretched, though, and is somewhat overbought.
The equity-only put-call ratios continue to decline. Thus, they remain on buy signals, but they are not far from reaching the lower regions of their charts, which would make them overbought at least.
Market breadth has been steadily positive, and has reached an overbought state as well -- from which sharp corrections often occur.
By Lawrence G. McMillan
The over-riding characteristic of this market since the first of the year is boredom. Daily ranges are tiny, and volatility is practically non- existent. This is ironic, of course, since at the end of last year, so many traders were certain that volatility would increase dramatically once the holidays were over.
The $SPX chart is in an intermediate-term uptrend. The dominant trend line is the rising one that connects the October and November bottoms.
By Lawrence G. McMillan
Monday was a very boring market day (again), which did nothing to chance the technical situation at all. Breadth was actually fairly positive, so the breadth oscillators remain on buy signals, and the oscillators are modestly overbought. The equity-only put-call ratios remain strongly on buy signals as well. $VIX did rise a little, but not enough to change the fact that it is still in a downtrend, and that – coupled with the fact that the $VIX futures term structure is still positively sloped – is bullish.
By Lawrence G. McMillan
The stock market finally was able to take advantage of the favorable seasonal pattern and break out to the upside. It is now imperative that $SPX take out the October highs at 1293. It would be bearish if $SPX closes back below 1260.
Equity-only put-call ratios remain on buy signals.
Market breadth (advances minus declines) has been acceptable but not strong. This is a potential problem, and is one of the few negative divergences.
By Lawrence G. McMillan
The Standard and Poors 500 Index ($SPX) is hovering near 1260 once again. What makes this significant is that this is the area not only of the 200-day moving average of the index, but it is also the point where the index meets the downtrend line connecting the recent market tops. A close above 1270 would be a clear upside breakout.
Both the standard equity-only put-call ratio and the weighted ratio are on buy signals.
By Lawrence G. McMillan
Tuesday's big rally was enough to swing things over to the bullish camp, heading into the year-end. The continued bullishness has carried the market to the point where it has now reached the traditionally bullish Santa Claus rally time frame: the last five trading days of one year and the first two of the next.
The $SPX chart is confined by two trend lines (Figure 1). A breakout through either trend line should propel a sizeable move in the same direction.
