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By Lawrence G. McMillan

$SPX has broken out over resistnace at 2740. This gets it out of the 2700-2740 trading range that is been in for several weeks. The 2700 level has been support and/or resistance for over three months now, acting as a sort of weird magnet for the market.

Above these levels, there is another important resistance level at 2790-2800, which is where the market failed in March and again in June. Unless that resistance is overcome, the $SPX chart won't be in a fully bullish state. Above there, of course, are the all-time highs at 2875, but that is a long way from here.

Both equity-only put-call ratios are on sell signals at this time. The weighted ratio (Figure 3) has been on a solid sell signal for a couple of weeks. The standard ratio (Figure 2) just verified its sell signal this week.

Market breadth has greatly improved in the last week. It was up modestly for four days in a row, and then up strongly on July 5th and 6th. As a result, both breadth oscillators are once again on buy signals -- have canceled out recent sell signals.

Volatility as a whole is somewhat bullish mostly because of the recent $VIX "spike peak" buy signal (marked in green in Figure 4). If $VIX drops below 15 and stays there, then that should be a strong positive for the stock market.

In summary, we have mixed indicators. The put-call ratios are bearish, as is the divergence of new lows over new highs (something that I find interesting). But breadth is now improving, and volatility always seems to be bullish these days. That leaves the $SPX chart which has taken on a more positive tone with the breakout over 2740.

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

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