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Weekly Stock Market Commentary 8/7/2020

By Lawrence G. McMillan

The market, as measured by $SPX, moved to new relative highs this week, finally breaking out over resistance at 3280. From there, it quickly moved to 3330, closing the huge gap down that had been left on the chart from when the bear market began on February 24th. Now, it has its sights set on the all-time highs at 3395, which is the last remaining resistance area. After this week's action, a close back below 3200 would be cause for concern.

Equity-only put-call ratios remain on buy signals, but in a very overbought state. The standard ratio appears to be moving sideways now, but is still at low levels not seen since January 2004.

Breadth oscillators are both on buy signals now, after positive breadth this week canceled out previous sell signals. Also cumulative breadth statistics are at new all-time highs and thus are predicting $SPX will follow.

Volatility indicators remain bullish. $VIX is trading below its 200-day moving average and so is its 20-day moving average. Unless both of these cross back above the 200-day, this intermediate-term indicator will remain bullish.

In the short-term $VIX remains bullish as well, as the most recent $VIX "spike peak" buy signal of July 14th is still in place. In summary, the outlook remains positive for the stock market. There are no sell signals in place at this time. Only a close by $SPX below 3200 would give us cause for concern at the current time.

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

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