Weekly Stock Market Commentary 4/17/2020

By Lawrence G. McMillan

Stocks have continued to rally, for the most part, although the rally was beginning to break down a bit technically until a positive news report about an antiviral for the coronavirus sickness spurred an 80- point rally in S&P futures overnight.

We continue to feel that the 2850-2900 range on $SPX represents some resistance. There is more or less resistance all the way up to the next significant level, at 3010 (which is also where the 200-day moving average is).

There is support at 2650, the area where from which this rally accelerated upward after breaking out over 2650 last week. Prior to that, there had been a minor support area at 2450. Then, of course, there is the potential "V" bottom at 2175-2190, from March 23rd.

Despite the strength of the oversold rally, the $SPX chart still is negative in that most of the intermediate-term trend lines are declining, and thus some bearish position should be maintained.

Equity-only put-call ratios remain on buy signals. They are declining sharply from their well-timed buy signals in late March. As long as they are declining, they will remain bullish.

Market breadth started to lag this week, and both breadth oscillators generated sell signals.

Volatility remains the discussion for many. There is a new "spike peak" buy signals. The intermediate-term trend of $VIX, however, is still negative for the broad market. This will not turn bullish for stocks until $VIX closes below its rising 200-day moving average.

In summary, the bulls are certainly on a roll right now, with the oversold rally having reached new heights and then spurting even higher on the overnight news. But we are maintaining a "core" bearish position, while trading counter-trend buy signals around it.

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