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Weekly Commentary 3/9/2012

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.

Weekly Commentary 3/2/2012

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.

Expect more volatility in March

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.

In focus: A crack in the dam?

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.

Weekly Commentary 2/23/2012

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.

More on Volatility ETN’s - VXX, XIV, VQT

By Lawrence G. McMillan

In the last issue, we laid out a trading system for VXX and XIV, the most liquid short-term volatility ETN’s.  VXX uses the two front-month $VIX futures contract to create an instrument that tracks near-term volatility directly, while XIV is the inverse of the same thing.

We had left a few questions open at the end of that previous article, and we aim to answer those in today’s issue.  Moreover, some reader questions have been asked as well, and we will address those too, since they are important to the overall concept.  

Weekly Commentary 2/16/12

By Lawrence G. McMillan

Was the two-day selloff on Tuesday and Wednesday of this week enough to refuel the bulls?  It may have been.

$SPX closed at a new high for this post-October rally, although it has not yet exceeded the 2011 high at 1370.  With today's rally there is clearly strong support at 1340. which is at 1290.      

Equity-only put-call ratios are technically on buy signals. However, they edged higher over the last two days.      

Weekly Commentary 2/9/12

By Lawrence G. McMillan

The stock market refuses to back off. This is making TV commentators gleeful, but experienced traders are finding such one-sided action to be a bit dangerous.

A System For Trading VXX

By Lawrence G. McMillan

The CBOE’s Futures Exchange introduced futures on the volatility index, $VIX, in 2004 and began trading options on $VIX in 2006.  The Barclay’s Volatility ETN (VXX) has been around since January 31, 2009.  VXX owns $VIX futures and rolls them in a manner consistent with the formula for creating $VIX.  Hence the two – $VIX futures and VXX are directly related.  We have recently conducted a study, investigating a trading system for VXX, based on the differential in the prices of the two front-month $VIX futures.

Overbought market due for a correction

By Lawrence G. McMillan

MORRISTOWN, N.J. (MarketWatch) — As much as I like the intermediate-term picture, where nearly all of our indicators remain bullish, the overbought condition that has been created is reaching the stage where – if it’s not alleviated soon – it could result in a gut-wrenching drop that can wreak havoc on portfolios and, more importantly, on psyches.