In nearly 45 years of trading, I don't think I've ever seen a market as wild as the one has been this month. Let's review the entire technical picture. First of all, the chart of $SPX has not yet returned to a bullish state. $SPX would have to trade at new highs (above 2080) in order to turn the chart bullish again.
We have traditionally used the mBB system only with respect to the $SPX. It has worked well there, as we have had some very successful mBB signals this year: a buy signal in February, a sell signal in September, a buy signal in October, and now another sell signal recently. The only incorrect signal this year was a sell signal in June ($SPX eventually fell in late July, but no reasonable trader would have still been holding a short that was established in early June).
Various indicators have been turning bearish since mid- November. But until this week, $SPX itself had not broken down, and since price is "king," that was quite important. However, now $SPX has broken down, as it has fallen below support at 2050. This completes a bearish pattern, and a full-fledged correction is underway. This could be sharp and short-lived, and since it is taking place late in the calendar year (when seasonal bullishness occurs), that is probably the case.
The latest release of Option Workbench has a new look and feel and contains a ton of new features including earnings data, position editor enhancements, position creation, position management and a portfolio monitor. A one month free trial is now available by clicking here and using Coupon Code: FreeOWB.
Read the release notes below for a more detailed explanation and watch the video.
The stock market, as measured by the Standard & Poors 500 Index ($SPX), sold off for a couple of days and then rebounded quickly to new all-time intraday and closing highs. However, sell signals and overbought conditions abound, so all is not bullish.
With $SPX making new all-time highs, its chart is bullish, and the trend of the market is higher. Price is the most important indicator. That has not changed.
The stock market, as measured by the Standard & Poors 500 Index ($SPX) continues to march upward at a dizzying pace. The market is overbought, and if $SPX violates support at 2060, we could finally see a correction.
Equity-only put-call ratios remain on buy signals. You can see from Figures 2 and 3 that the ratios are still trending downward. That is bullish.
Both of the breadth indicators remain on buy signals, and they are modestly in overbought territory.
The stock market advance is relentless. It has refused to correct for more than a day since bottoming over a month ago and over 230 points lower., but it is up another 12 points in overnight trading as I write this. The chart of $SPX is bullish because it remains in an uptrend.
Equity-only put-call ratios remain on buy signals, as they continue to drop sharply almost daily.
It has been a great stock market rally, with $SPX advancing 200 points in about a month. But the advance is slowing, and sell signals are setting up (although none has actually been confirmed yet).
$SPX has minor support at 2030 and also below there, at 2000.
Equity-only put-call ratios have remained solidly on buy signals for nearly a month. They are dropping rapidly on their charts, and it's bullish for stocks as long as they continue to decline.
The rally continues to push to new all-time highs in most of the major broad-based indices ($SPX, $OEX, Dow, etc.). The advance has been so straight and fast that it hasn't left any support levels in its wake. The only one was at 2001, so a pullback below 2000 would be negative.
The rally has been a straight-up affair, leaving a "V" bottom in its wake. Fortunately, our indicators have generated a strong series of buy signals along the way.
Since $SPX has sliced through virtually every conceivable resistance area, it makes it difficult to identify either support and resistance at this point. However, the overbought conditions that now exist have -- in the past -- caused the market to stop rising.
