Weekly Stock Market Commentary 12/22/17

By Lawrence G. McMillan

The stock market euphorically gapped to new all-time highs on Monday, after the Tax Bill had been passed over the weekend. Pessimists might say that a gap to a new all-time high, on "the news," is a selling opportunity. They might be right, but it's really to soon to tell. One would have to see $SPX break some support areas before that could be confirmed. The bottom line is that the intermediate- term trend of $SPX is still up.

Equity-only put-call ratios have moved sharply lower over the past month or so, reflecting the ongoing bull market, which has been accompanied by heavy call buying. Hence they are overbought, but are NOT on sell signals at this time.

Market breadth has not been great. But that's been the case for over a year now, and the market keeps moving higher.

Volatility remains at extremely low levels which is an overbought condition, but not a sell signal. $VIX is going to have to demonstrate some ability to rise and remain in an uptrend before this indicator would turn bearish for stocks.

Finally, we need to mention the bullish seasonality. The Santa Claus rally period began with the close of trading on Thursday, December 21st. It encompasses the last five trading days of this year and the first two of the next year.

In summary, the intermediate-term outlook is positive as long as $SPX remains above support and $VIX remains low. Short- term, there are some overbought conditions that could develop into sell signals, although one would expect them not to be confirmed until the current seasonally bullish period ends.

This Market Commentary is an abbreviated version of the commentary featured in The Option Strategist Newsletter.

The Option Strategist Newsletter $29 trial

Share this

Option Strategist
Blog Search

Recent Blog Posts

Trading or investing whether on margin or otherwise carries a high level of risk, and may not be suitable for all persons. Leverage can work against you as well as for you. Before deciding to trade or invest you should carefully consider your investment objectives, level of experience, and ability to tolerate risk. The possibility exists that you could sustain a loss of some or all of your initial investment or even more than your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and investing, and seek advice from an independent financial advisor if you have any doubts. Past performance is not necessarily indicative of future results.
Visit the Disclosure & Policies page for full website disclosures.

-->