By Lawrence G. McMillan
The Fear Of Missing Out (FOMO) appears to be the theme in recent days. $SPX and other major indices are roaring ahead, despite a relatively narrow number of stocks carrying the load. But one thing is sure: for now, the $SPX chart is extremely strong.
Equity-only put-call ratios are trending lower again, as call buying has been fairly heavy in this current leg of the stock market rally. Thus they are on low-level buy signals. We would need to see them roll over and begin to trend higher in order for them to be confirmed sell signals.
Market breadth has been positive, if not spectacular. Both breadth oscillators remain on buy signals even though advances have only modestly ounumbered declines for most of this month.
Volatility remains low as well, and that continues to be bullish for stocks. The $VIX "spike peak" buy signal of December 4th is still in place. On a more intermediate-term basis, $VIX is below its 200-day Moving Average and the 20-day MA of $VIX is also below the 200-day MA. That is bullish for stocks also.
Finally, the seasonal period ("Santa Claus Rally" and the end of the post-Thanksgiving seasonal) runs through Friday, January 3rd. That doesn't mean the market will abruptly fall at that time, but it does mean that it won't have the benefit of seasonality after that date.
In summary, the outlook is bullish because of the strong momentum in the market and the lack of sell signals. A market like this can produce complacency, but that is the one thing we can control -- we can and must avoid becoming complacent. But, for now, enjoy the run to the upside.
This Market Commentary is an abbreviated version of the commentary featured in The Option Strategist Newsletter.
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