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Weekly Commentary 2/3/2012

By Lawrence G. McMillan

The market continues to rise, mostly in a very slow-motion fashion. Meanwhile, overbought conditions are building.  $SPX has bumped up against the 1330 level for three days in six, without being able to break through.  I would not expect any correction to violate that bullish trend line, but if it should happen, it would be a major negative factor.

Equity-only put-call ratios remain split.  The standard ratio remains on the sell signal that was generated last week.  But the weighted ratio remains on a buy signal.

Overbought market still has bullish potential

By Lawrence G. McMillan

MORRISTOWN, N.J. (MarketWatch) — The bulls have been completely in charge. While there may be some short-term victories ahead for the bears, it appears the bulls are not finished yet.

VIX continues to drop

By Lawrence G. McMillan 

Source: CBOE Futures Exchange -- The CBOE Volatility Index (VIX) is accelerating in its downtrend. This is likely bullish for stocks and reflective of the strong stock market rally in the S&P 500 Index (SPX) that has taken place so far this year. Not only has the market rallied, it has done so in a very straight-line fashion with small daily ranges.

Weekly Commentary 1/27/2012

By Lawrence G. McMillan

There have only been four down days in January, and as a result the market is very overbought.  The intermediate-term indicators are mostly still positive at this time, although there is one glaring exception -- a new sell signal (just registered today) from the standard equity-only put-call ratio.      

Other intermediate-term indicators remain positive, though.  For example, $SPX is still clearly in an uptrend.  However, if the 1260 level were breached, that would be much more bearish.      

All Indicators Overbought

By Lawrence G. McMillan

Friday was another boring market day, with $SPX in a 6-point range.  The reality of the situation seems to have struck $VIX traders, though, as that index lost another 8% on Friday.  The downward trend of $VIX is bullish for stocks, but this is beginning to look a big overdone.  I would have to say that $VIX at 18 (and $VXO below 17) is certainly in overbought territory. 

Weekly Commentary 1/20/2012

By Lawrence G. McMillan

The stock market continues its slow steady march upward.  The $SPX chart is becoming stretched, though, and is somewhat overbought.      

The equity-only put-call ratios continue to decline.  Thus, they remain on buy signals, but they are not far from reaching the lower regions of their charts, which would make them overbought at least.

Market breadth has been steadily positive, and has reached an overbought state as well -- from which sharp corrections often occur.      

New Product: Emerging Markets VIX Futures (VXEM)

By Lawrence G. McMillan

The CBOE Futures Exchange (CFE) has launched a new volatility futures contract – this time on the Emerging Markets ETF (EEM).  The volatility index (i.e., the EEM VIX) is calculated from EEM options and is listed under the symbol $VXEEM.  The futures on that index trade with a base symbol of VXEM.  Currently there are March, April and May futures trading.  If you’ll recall, after the initial $VIX futures were listed on the CFE, the only other futures to be listed were those on the Gold ETF (GLD).

Weekly Commentary 1/13/2012

By Lawrence G. McMillan

The over-riding characteristic of this market since the first of the year is boredom. Daily ranges are tiny, and volatility is practically non- existent. This is ironic, of course, since at the end of last year, so many traders were certain that volatility would increase dramatically once the holidays were over.

The $SPX chart is in an intermediate-term uptrend. The dominant trend line is the rising one that connects the October and November bottoms.

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Watch McMillan's Traders Expo educational video interviews on portfolio protection, option strategies for high volatility environments and "90% days" at the money show website.  Click on the links below to watch each video topic.

Technicals remain bullish

By Lawrence G. McMillan

Monday was a very boring market day (again), which did nothing to chance the technical situation at all.  Breadth was actually fairly positive, so the breadth oscillators remain on buy signals, and the oscillators are modestly overbought.  The equity-only put-call ratios remain strongly on buy signals as well.  $VIX did rise a little, but not enough to change the fact that it is still in a downtrend, and that – coupled with the fact that the $VIX futures term structure is still positively sloped – is bullish.