By Lawrence G. McMillan
Tuesdays after three-day weekends often produce wide swings. Yesterday was no exception. A higher opening was almost immediately followed by severe selling – knocking $SPX down almost 25 points. But then the bulls found their buy buttons, and the market rallied back to finish slightly on the upside. The support at 1990 remains intact, and it is an important level. Resistance is at 2030 and 2065, the latter being the more important one.
Equity-only put-call ratios remain on buy signals. There was no change in their status yesterday.
Breadth was miserable yesterday, as it was heavily negative with the morning’s selling and typically did not recover all the way with the late day rally. As a result, the “stocks only” oscillator’s recent buy signal has already been canceled out. This is not a major development, as it is fluttering about the –200 level. But breadth needs to make some serious improvements in order to support at more concrete rally.
There was some strange action in the volatility indices. $VIX dropped a lot in comparison with $VXST. It’s almost as if Friday’s closing quote was erroneous. In any case, with $VXST back above $VIX, continue to expect actual volatility to be high in $SPX. With little fanfare, it should be noted that there was another $VIX “spike peak” buy signal yesterday. $VIX was in a “spiking” mode last week, when it rose more than 3.00 points between the 8th and the 13th. Yesterday, it closed more than three points below the most recent intraday peak (i.e., the peak established after the “spiking” status was achieved – 23.43). This has occurred once before that I can recall, but we do not double up in these situations.
In summary, the indicators are mostly bullish, with $VIX and put-call ratios leading the way. But price action has not followed, although as long as support at 1990 holds, the bears are in abeyance.
This commentary was featured in this morning's edition of The Daily Strategist newsletter.
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