The upside breakout over 3430 that began last week extended into a buying spree this week. A modest correction then ensued. This pullback seems normal, so far, and the bullish case is still intact as long as $SPX remains above 3400.
The equity-only put-call ratios are grudgingly bullish, as these ratios have turned down again even though they are still at very low levels on their charts. It feels like more of a "sell cancel" than a "buy."
This is a subject that we wrote about in the July 31st, 2020, issue. Cumulative Advance-Decline Volume Breadth (CVB) is determined by 1) calculating the daily difference between volume on advancing issues minus volume on declining issues, and then 2) keeping a running sum of that daily total. We pointed out that there have been a few times in the past where this CVB made a new all-time high while $SPX had yet to do so. Every time, $SPX followed along to a new high of its own.
Join Larry McMillan as he discusses the current state of the stock market on Monday, October 5th, 2020.
Two weeks ago, it appeared that the bears had control of the market. But if they did, they fumbled it badly. Beginning with a modest oversold rally on September 24th, the broad market has staged a strong rally, backed by some of the strongest breadth we've seen in while. Now, $SPX has broken out over what had been multiple resistance in the 3425-3430 area. That has changed the $SPX chart's designation to "bullish."
$SPX In Election Years
We have $SPX data going back to 1950, so it wasn’t too difficult to construct the following Table, which shows the performance of the market (as measured by $SPX) each election year, from the last trading day in July through the day prior to Election Day. It should be noted that the stock market was closed on Election Day until 1984 – a rare bit of trivia probably not known by most younger traders.
Join Larry McMillan as he discusses the current state of the stock market on Monday, October 5th, 2020.
There are a lot of cross-current buffeting this market currently, and another major one has been added: President Trump has tested positive for the corona virus. This raises all sorts of uncertainty about governance (will the Vice President have to take over?) and the election. There is no way to know how this is going to play out. All we do know is that the S&P futures reacted only mildly dropping about 50 points on the news. So, the following commentary is based on the technical factors that we do know.
There are currently a number of factors affecting the CBOE’s Volatility Index ($VIX), most notably the upcoming Presidential Election and the fears of market volatility that a contested election might foist upon the stock market. But there is another element that is affecting $VIX, and it is not getting much press. Specifically, it is the after-effect of an initial bear market “shock” on $VIX.
Join Larry McMillan as he discusses the current state of the stock market on Monday, September 28th, 2020.
The market is in a stair-step pattern lower. This is a relatively orderly decline, compared to the "smashes," if not "crashes," of Feb 2018, Oct 2018, Dec 2018 and March 2020. But the bears are in charge now that the 3280 level has been broken.
