Tuesday saw very little follow-through to Monday’s strong day, and that was disappointing. Although $SPX and other major averages made marginal new all-time highs, it certainly didn’t look or feel like a good day. $SPX has technically broken out, and it has support all the way down to 1880, or even slightly below.
The stock market continues to frustrate all but the most short-term traders. Anyone looking for a trend to develop has not been able to find one in weeks. Wednesday's low at 1860 is support, as is the previous week's low at 1850. Below there, the April lows at 1810 are a major support level. Resistance, however, exists all throughout the 1880-1900 area.
The stock market is stalled at the high end of its trading range (1810-1900). There is near-term support at last Monday's low of 1850.
Equity-only put-call ratios remain split. The weighted ratio continues to decline from a recent high, and that means it's on a buy signal, while the standard ratio remains on a sell signal.
There is only going to be one issue published in May – on the 4th Thursday, May 22nd. We are planning for that to be a “double issue.” The reason for this change in the publication schedule is an extensive travel schedule from April 30th through May 15th, which will not allow time for publication of a formal issue. The weekly Hotline updates will continue throughout this time, without interruption.
The stock market is once again nearing all-time highs, although it has not broken out (yet). If $SPX can't punch on through to new highs, then it will remain within the widened trading range. At this point, most of the technical indicators are bullish, so we would expect at least an attempt to challenge the highs.
Equity-only put-call ratios have remained on sell signals for over a month now. That is beginning to change, as the ratios are starting to roll over.
The stock market abruptly ended its decline of a week ago and rallied all week. Wednesday's strongly higher opening turned into an overall bullish day, and as a result a number of indicators rolled over to buy signals or generated new buy signals as well.
We are back on a normal publishing schedule for the next two issues. However, due to travel commitments in May, there will only be one issue of The Option Strategist that month – to be published on May 22nd. There is some precedent for this in the past, and we will attempt to publish a “double issue” at that time. As always, the weekly Hotline updates will continue without interruption.
The stock market has taken on a potentially bearish tone, although all the pieces are still not in place. But now that 1840 level has given way, the bears finally seem to have a chance to really take control of the market for the first time since the fall of 2012. We are not necessarily saying this is a full-fledged bear market, but the intermediate-term outlook is now turning bearish.
The upward market reversal that began on Tuesday when $SPX bottomed near the 1840 area, continued with passion on Wednesday. The rally was aided by the benign Fed minutes, and now $SPX is 25 points above Tuesday’s lows. The rally was accompanied by some very strong technicals as well. It was almost as if the buyers were waiting for the sellers (of Friday and Monday and early Tuesday) to finish before they stepped in with a vengeance.
The broad stock market, as measured by the Standard & Poors 500 Index ($SPX) made new all-time intraday and closing highs on consecutive days this week. That, coupled with some new buy signals from breadth makes our intermediate-term outlook bullish.
Countering the bullish case is the fact that the equity-only put- call ratios have stubbornly remained on sell signals, but this might be protective hedging activity.
