Weekly Commentary 10/21/2011

By Lawrence G. McMillan

The stock market remains volatile within an ever-narrowing range. For ten days now, $SPX has traded within a range of 1190 to 1230. Clearly a breakout of that range should be significant.

Equity-only put-call ratios are a bit mixed. The weighted ratio rolled over to a buy signal about two weeks ago, but the standard ratio has continued to climb -- thereby remaining on a sell signal.

Breadth indicators continue to remain on buy signals, and they have reached varying degrees of overbought.

The most bearish indicator has been $VIX. The fact that $VIX has moved above 33 is bearish, as it completely negates the previous breakdown of last week.

In summary, we are not saying that anything is in place yet; rather, we will observe the move in $SPX -- either above 1230 or below 1190 as the trigger for the next move.

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