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Weekly Commentary 9/9/2011

By Lawrence G. McMillan

The chart of $SPX has developed a very interesting characteristic: there is a rising channel -- called a "pennant"  on the chart.  A breakdown below the lower boundary of the channel creates a very negative technical formation.      

Equity-only put-call ratios, meanwhile, are quite bullish.  They rolled over to buy signals last week and continue to decline.      

Still volatile and dangerous

By Lawrence G. McMillan

The stock market has been swinging back and forth in wide ranges, moving from deeply oversold to deeply overbought and back again with extreme moves.

The bulls have regained the upper hand...for now

By Lawrence G. McMillan

Buyers finally emerged yesterday afternoon and they have continued into today.  In my mind, the complete impetus for this rally was the severe oversold condition that had emerged over the previous three days of heavy selling.  Today’s rally is on track to being a “90% up day” – certainly in terms of “stocks only” data and potentially in terms of NYSE-based data as well.  At the current time, on the NYSE, advancing volume is 12-to-1 over declining volume.

Weekly Commentary 9/2/2011

By Lawrence G. McMillan

Technical indicators have turned more bullish in the past week, so the current rally probably has more room to run.  The chart of $SPX has taken on a slightly more bullish tone. This week $SPX overcame resistance at 1200-1210, although it has now fallen back below that level.  

There is also resistance at 1230 -- the intraday high of both the last two trading days.      

Odds are due for a short-term pullback

By Lawrence G. McMillan

The market responded to a number of factors on Monday to put together one of the strongest days of the year.  Perhaps too strong (for example, advancing volume on the NYSE was 34 times that of declining volume!).  It was yet another "90% up day" and now there have been three such days without an  intervening "90% down day."  Odds are due for a short-term pullback.  However, once that gets out of the way, we would expect higher prices in line with the improving technical indicators that we mentioned yesterday.

Safe Approaches To Volatility Skew Trading

By Lawrence G. McMillan

Vertical skews appear in option prices during times of panic and in futures prices in terms of euphoria.  Since we have been experiencing a lot of both lately, we have gotten some requests from traders asking how to play these skewed situations without using naked options.  This is a subject that we have covered in the past, but it might be a good time to review it, considering current market conditions.  

Oversold rally in effect

By Lawrence G. McMillan

The rally that could have sprung up at any time – given the oversold conditions that existed – is taking place.  As we mentioned in the Volatility Report (overnight), a key factor was the CBOE’s Equity-only Put-call ratio exceeding 1.00 on Friday.  That is rare and usually precedes a strong (but short-lived) rally within a day or two.  It other indicators don’t chime in today, this move may more or less be the extent of that signal.

Weekly Commentary 8/19/2011

By Lawrence G. McMillan

The $SPX chart is perhaps the most negative technical indicator of all.  The pattern of lower highs and lower lows persists.  How far can this next down leg carry?  1100 is the intraday low from last week; 1077 is the overnight low for the futures; and some technical targets suggest a decline to the 1040-1060 area, which was support from the summer of 2010.      

High-volatility standoff

By Lawrence G. McMillan

The panic of a week ago has subsided, but the market remains nervous and volatile — not as volatile as last week, but far more volatile than it has been in the past year or so.  The oversold conditions, massive as they were, have spurred a rally that is still in progress.  However, upside progress has stalled, and the bulls and the bears are locked in combat at or near current levels.

$SPX 1178: The Line in the Sand

By Lawrence G. McMillan

The market opened stronger, after some economic data was released, and that rally lasted for less than a half hour. Since then, its been a slow decline, but a large one, and the support at 1180 is in danger of giving way. This would not be good. Specifically, a close below 1178 would spell then official end of this short-term oversold rally that has been underway for the last few days. Thus, the $SPX chart remains in a negative downtrend.