The S&P 500 Index ($SPX) has been bouncing back and forth in a trading range for several weeks now. So, for now, $SPX is trading between 2965 and 3155. A wider trading range could probably be justified as well: 2920 on the downside and 3184 on the upside. 2920 was the top of the April-May trading range, and 3184 would close the gap on the island reversal. Either would be significant for a potential breakout, but until that occurs, we can expect continued volatile price action within the current range.
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So we have a sort of standoff developing. It would have a bullish resolution if $SPX could rally to 3184 and close the gap on the island reversal. However, a further break below that support at 2965 would be to the bears' advantage. So, in the short- term we are waiting for a breakout to occur.
The equity-only put-call ratios remain overbought. The standard ratio continues to trade at or near 16-year lows, as both ratios remain on buy signals in overbought territory.
A week ago, stocks were on their heels after one of the worst down days on record on June 11th. Prices rallied within a couple of days, but the negativity of that day still hangs over this market. If $SPX were to fall below 2920, that would be bearish. But as it stands, the $SPX chart remains bullish as long as the Index holds above 2920.
Equity-only put-call ratios continue to fall, thus remaining on buy signals. That will continue to be the case until they visibly roll over and begin to rise.
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Stocks continue their wild ride. Yesterday, $SPX gapped open strongly higher, then gave back all the gains in a very short period of time when Fed Chairman Powell said that the Fed might not be buying everything, forever. But that selloff was quickly reversed in a matter of minutes. In the end, $SPX closed nearly 60 points higher, It closed right at the lower edge of the gap from last Thursday. If that gap is filled (at 3182), it would be another bullish sign. Short-term support exists at 2965 (Monday’s low, which was left in the dust by the 188-point rally that followed in about 1 trading day, as Monday’s lows were made in the morning and Tuesday’s highs were also registered in the morning; the move in futures was even larger). Below that, support in the 2920-2940 range is important. It is the top of the trading range from April-May; if $SPX were to fall back into that trading range, it would negate a lot of work that’s been done since then.
The overbought conditions intensified this past week with a couple of huge up days on June 5th and 8th, but then exploded into one of the worst down days in history on June 11th. The wild ride seems destined to continue.
Join option strategist Larry McMillan as he discusses the current state of the stock market and what our option-oriented indicators are saying.
In the November 1929 - April 1930 rally, stocks rose 48% and volatility (all that we have to go on from that time period, of course, is realized/historic volatility) dropped from 112% to 8%!! Then we all know what happened after that: the wheels came off, and the market made new lows by October 1930, and the rout was on.
