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
Despite positive seasonality, strong upside momentum, and buy signals among the various indicators, the market — as measured by Standard & Poor’s 500 Index — has basically repeated what happened before: it has failed at resistance posed by the 200-day moving average and by the downtrend lines connecting the recent tops over the past few months.
By Lawrence G. McMillan
In this morning’s comment, I mentioned that the previous two times $SPX failed to break through the area of resistance in the 1260-1270 area, it turned down sharply. That’s what the bears are trying to duplicate today. I’m not sure they’ll be able to do it during this period of seasonal strength, but they are giving it a good go nonetheless.
By Lawrence G. McMillan
...We still expect a bear market to unfold – one that will be far more severe than what we’ve seen in the last few months (although perhaps not so volatile). It is likely that the next bear market will take out the 2009 lows, thereby souring an entire generation (or two) on stock ownership for much of their lives – as happened with investors in the 1930's.
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.
By Lawrence G. McMillan
With this newsletter, we have reached 20 full years of publication. Hopefully, there will be 20 more! As far as the stock market goes, it was a pretty wild year, but not necessarily out of character with the ever-increasing volatility that the market has exhibited much of the time in recent years. Ever since the manipulated interest rate environment and accompanying bull market of 2006, where $VIX repeatedly dipped below 10, markets have been volatile. It began with the volatility explosion in February 2007 and continues to this day.
By Lawrence G. McMillan
For nearly two weeks, the market – as measured by the S&P 500 Index – had mostly declined. From a high of 1,261 on Dec. 7, the index fell to nearly 1,200 by last Monday, Dec. 19. As one might imagine, such a decline created an oversold condition.
By Lawrence G. McMillan
The oversold conditions, coupled with some positive news out of Europe, created a buying vortex yesterday. This was so strong, that it was (of course) a true "90% up day" in "stocks only" terms and a "90% up volume day" in NYSE terms. So, while the rally was enjoyable, it has already created an overbought condition.
By Lawrence G. McMillan
Rather heavy selling over the past six days (with the exception of last Friday) has resulted in a deeply oversold condition. That should produce a short-term rally, but after that the picture is far less rosy.
The bigger picture in $SPX shows two converging trendlines: a rising trendline connecting the October and November lows, and the declining trendline connecting several tops since July (which is near the 200-day moving average a major provider or resistance to date). Both are significant.
By Lawrence G. McMillan
Despite some position seasonality and oversold conditions, the bulls have not been able to gain a foothold, as the stock market has dropped sharply over the past three days.
