By Lawrence G. McMillan
Extremely heavy selling swamped the market in the early going on Tuesday. But at about 11:30am, a rally started that lasted most of the rest of the day. As a result, what might have been an extreme oversold day did not occur. Whether or not an extreme oversold day is required in order to put in a bottom, is unclear. But for now, the $SPX lows at 1347 are a support area, with support at 1340 below that. At least Tuesday’s lows took out the overnight lows from Sunday, so the day and night sessions are back in synch.
By Lawrence G. McMillan
Earlier this week, a strong upside breakout was accompanied by generally positive technical indicators. But worries over the unemployment report have upset things somewhat. I'm not sure how the positive technicals got hijacked by the negative media and fundamentalist attitude about one economic number, but they did.
$SPX has pulled all the way back to the 1390 support level. There is resistance at 1415-1420 and support at 1358. The equity-only put-call ratios remain on sell signals. Breadth indicators have turned negative as well.
By Lawrence G. McMillan
MORRISTOWN, N.J. (MarketWatch) — When the broad stock market, as measured by the Standard & Poor’s 500 Index, broke down through the important 1,390 support level in early April, it seemed that the bears would finally have their chance to take control after a long run by the bulls.
By Lawrence G. McMillan
$SPX has essentially been trading sideways for about three weeks. The net result of this sideways action has been to relieve all of the overbought conditions that existed. Thus, the stage was set for another rally attempt if the bulls had the wherewithal to break out above 1390, a feat which they accomplished Thursday.
Market breadth has not been particularly strong until the last week or so. The breadth indicators are on buy signals.
By Lawrence G. McMillan
The bears have had many chances this month to do some serious damage to the market but they haven’t been able to. Perhaps they are waiting for the “sell in May and go away” crowd to join them next month, but perhaps they just don’t have the firepower to drive the market down. Whatever it is, the indicators and the bulls are on the brink of pushing this market higher again.
By Lawrence G. McMillan
The market gapped higher on what has become 'typical' Apple earnings euphoria. Durable goods orders came in below expectations. Meanwhile, the Fed has notified us interest rates will remain at their very low levels. Follow through after the open was short-lived, which was to be expected on a Fed day. What should also be expected is violent unpredictable swings throughout the rest of the day. Thus, we need to focus only on the recent major levels of support and resistance, roughly $SPX 1390 above and, for now, 1358 below.
By Lawrence G. McMillan
The Standard & Poors 500 ($SPX) chart (Figure 1) still shows heavy resistance at 1390. That level has been challenged on five of the last six trading days. So far it has held, thus making it a very strong resistance area.
Equity-only put-call ratios remain on sell signals, which originated a week ago. These ratios are now climbing their charts swiftly, solidifying those previous sell signals.
By Lawrence G. McMillan
One should be aware of a potential problem in these ETN’s. I am not referring to the “net asset value” problem that engulfed the “Double VIX” (TVIX) a couple of weeks ago. Rather, I am referring to the fact that an ETN is a credit obligation of the issuer (Barclays, in the case of VXX, VQT, and many others). An ETF, on the other hand, is collateralized by placing underlying securities on deposit.
By Lawrence G. McMillan
Volatility has returned with a vengeance. The bulls are very excited about the rally of the last two days. Perhaps they are correct in their euphoria, but we don't yet see it in the technical evidence. The violation of the 1390 support level this week turned the $SPX chart negative. something quite serious, but it if holds, that would be bullish.
When the market broke down on Monday through the 1390 support level, several other technical indicators turned bearish as well. First and foremost were the equity-only put-call ratios.
By Lawrence G. McMillan
In the last issue, we mentioned, on page 8, that the Composite Implied Volatility (CIV) indicator was on “sell alert.” Then in last week's Hotline update, we verified that a CIV sell signal had indeed occurred. It has proven to be a timely signal. This is an indicator that not many people are familiar with, so we will review the definitions and data that comprise the indicator.
