By Lawrence G. McMillan
We have been writing commentary for months now, detailing the steepness of the $VIX futures term structure. But recently, it has risen to levels never seen before in the listed VIX futures markets (volatility derivatives began trading in 2004). In this article, we’ll look at the current situation, compare it to past extremes, discuss appropriate strategies, and see if there is any predictive value to these extremes.
By Lawrence G. McMillan
In our daily letters and in last week’s hotline, we have written extensively about the “levitating act” that the stock market was performing. Essentially, it had gone from late December through this past Tuesday, while hovering above a number of standard indicators.
By Lawrence G. McMillan
The stock market decisively broke out to the upside on Tuesday, thereby confirming (in my opinion) that the volatile move we have been talking about would take place on the upside.
The equity-only put-call ratios are wavering around at more or less constant levels and aren't giving any clear signal right now. Market breadth hasn't been particularly great over the past three weeks, although it did revive enough this week to push the breadth indicators back onto buy signals.
By Lawrence G. McMillan
(Marketwatch) - Just a week ago, the market had its worst day of the year. The Standard & Poor’s 500 Index finally touched and even closed below its 20-day moving average, for the first time in 52 trading days.
By Lawrence G. McMillan
The gaps between historical volatility and implied volatility have never been larger. Furthermore, the gaps between $VIX and the intermediate-to-long-term futures have rarely been larger, as well. Trading desks around the street are aware of these facts and those with “volatility desks” are writing about the situation or making recommendations because of it. The one thing that no one seems to be addressing, though, is why the term structure of the futures is so steep and remains that way.
By Lawrence G. McMillan
A small market correction finally occurred this week, but it seems like it was nothing more than an opportunity for the bulls to buy at lower prices. $SPX once again established the 1340 level as support; in fact, it was a virtual trampoline as the index spurted higher after touching it on Tuesday.
Equity-only put-call ratios turned negative this week and remain on sell signals.
By Lawrence G. McMillan
Perhaps the first crack in the armor of this slow-motion bull market occurred this week, after Ben Bernanke spooked the market with his contention that there wouldn't be further easing.
The $SPX chart is still bullish. There is support at 1340-1350, and the 20-day moving average is at about 1350.
Equity-only put-call ratios remain on buy signals, but the weighted ratio is so low on its chart that it might be capable of rolling over to a sell signal without a lot of trouble.
By Lawrence G. McMillan
MORRISTOWN, N.J. (MarketWatch) — As this bull market has progressed — especially the most recent leg since the early October lows of 2011 — volatility has steadily dropped. Now it has reached a point where one might reasonably consider defensive or even bearish strategies, but not until there is at least one initial break in the bullish trend.
By Lawrence G. McMillan
Ben Bernanke doesn’t have a lot of friends these days, and he lost some of those with his statements before Congress yesterday.
By Lawrence G. McMillan
The S&P 500 Index ($SPX) pulled back only a little, but that was enough to alleviate some of the overbought conditions and to establish support at 1340.
Equity-only put-call ratios have begun to move sideways recently, but they remain on buy signals.
Market breadth was fairly negative from Feb 10th through Feb 15th. That was enough to alleviate the serious overbought condition that had existed in the breadth oscillators. Since then, breadth has improved again, and at this time, breadth is on a buy signal.
