Weekly Stock Market Commentary 4/24/2020

By Lawrence G. McMillan

The oversold rally that began on March 23rd has run into some resistance in the 2850 2900 area. The declining 50-day Moving Average of $SPX has, so far, acted as a hindrance towards further upside progress as well.

However, the market has not exactly reversed back downward from there, instead trading sideways as it appears to be gathering strength for another upside push. $SPX has traded in a "narrow" range (narrow for these times, anyway) of 2740 to 2780 over the last two weeks. If the rally does extend to the upside, there should be further resistance all the way up to 3000, where the declining 200- day MA is.

Equity-only put-call ratios continue to remain on buy signals, as the ratios are still declining at a rapid pace. The standard ratio is almost down to the levels where sell signals occurred in 2019 (but not to the extreme level of the sell signal in January 2020).

Market breadth continues to be relatively weak. The breadth oscillators are on sell signals once again, after some deeply negative days at the beginning of this week.

Volatility, on the other hand, is chock full of signals. There have been two $VIX "spike peak" buy signals in the last week. But From an intermediate-term perspective, though, $VIX is still flashing warning signs. It will continue to do so as long as it closes above its 200-day moving average.

In summary, we are maintaining a "core" bearish position, but we have traded buy signals around it. We will continue to take that approach. I am confident that our indicators are working, even in this volatile market.

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