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Weekly Commentary 12/9/2011

By Lawrence G. McMillan

The broad stock market -- as defined by $SPX -- had a major failure today in that it could not break through the upside resistance at 1265 (the approximate location of the 200-day moving average).

Equity-only put-call ratios are now struggling to remain on buy signals.

Market breadth has continued to be a fairly accurate short-term indicator, and the breadth indicators are technically on buy signals even after very negative breadth today.

$VIX has become rather docile, and seems to be calling for more of a trading range environment.

Protection remains costly

By Lawrence G. McMillan

The CBOE Volatility Index (VIX) is sometimes referred to as an indicator which measures the cost of protection. To understand the thinking behind this definition, consider that most portfolio managers using listed options to protect their portfolio either buy S&P 500 Index (SPX) puts or VIX calls. SPX put purchasing is still the more common method. When demand is high for SPX puts, the price of those puts is typically forced higher, increasing their implied volatility and thus usually increasing the price of VIX.

Weekly Commentary12/2/2011

By Lawrence G. McMillan

This week's rally has improved the status of many of the indicators, but not necessarily the chart of $SPX itself. A breakout above resistance and the 200-day moving average at 1265 would be required in order to turn this chart positive.

Equity-only put-call ratios have turned bullish. Market breadth swings the most wildly as these volatile moves occur. Currently, breadth indicators are on buy signals and are not yet overbought.

Market Commentary 11/25/2011

By Lawrence G. McMillan

Just over a week ago, $SPX was probing the upper end of the trading range, a few days after a strong rally on Veteran's Day.  But upside momentun slowed, and selling set in.  Since then, the selling has fed on itself with ample aid from a series of unsettling news:  

     1) the continuing European debt crisis      
     2) the lack of results by the Super Committee      
     and 3) the MF Global bankruptcy.      

Can this oversold market rally?

By Lawrence G. McMillan

It just doesn’t seem that this market can put a rally together.  There were two attempts to do so this morning, and both failed.  Yet, when $SPX probed below 1180, a strong buy program arose.  So there are buyers around, but the aren’t likely taking positions to hold, merely to trade.  

Weekly Commentary 11/18/2011

By Lawrence G. McMillan

The bears seized control with heavy selling over the past two days. However, all is not lost, but the bulls certainly squandered what could have been a good opportunity.  The $SPX lows today were 1209, with a close at 1216.  This is just barely clinging onto the old support range (1215-1230).  A rally from this level would be viewed as just another probe to the lower end of the wider trading range.      

Bulls and bears battle within trading range

By Lawrence G. McMillan

MORRISTOWN, N.J. (MarketWatch) — When the stock market, as measured by the Standard & Poor’s 500 Index, broke out over 1,220 about a month ago, it was a strong bullish signal. Most of the technical indicators agreed by registering intermediate-term buy signals as well.

Weekly Commentary 11/11/2011

By Lawrence G. McMillan

For the second week in a row, a rising market was blindsided by negative "macro" news out of Europe and suffered a violent downturn as a result. What has been quite astonishing is the speed with which the last two declines have occurred. When all is said and done, though, support at $SPX 1215-1220 is still in place.

The equity-only put-call ratios are clinging to their buy signals. Market breadth continues to swing wildly from day to day. Most recently, it is back on a buy signal.

European worries overwhelm positive technicals

By Lawrence G. McMillan

Yesterday was a strong day, backed by technical factors across the board.  But forget about it, because tonight the market is getting absolutely crushed.  S&P futures we down as much as 32 points, and are down about 26 right now.  The problem?  Italian interest rates are rising dramatically – particularly noticeable, apparently, on the 10-year notes.  The media is saying that the Italian bonds yields are a "crisis levels," whatever that means.

Velocity, not volatility

By Lawrence G. McMillan

Velocity.  That’s a term more commonly found in physics or aeronautical engineering or something like that, but stock market participants are becoming all too familiar with the word, even if they have no idea what v = Δx/Δt means.  Volatility is a measure of the size of market movements, but velocity is just the raw directional speed with which they occur.  After observing the market this week, I am more inclined to call what we are seeing as velocity, and not volatility.