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By Lawrence G. McMillan

After bouncing off of support at 4370 last week (the third time that $SPX has found support at that level --meaning it is now extremely important support), $SPX rallied to new intraday and all-time highs. The NASDAQ-100 ($NDX; QQQ) did the same, but the Dow ($DJX) has lagged behind.

The support levels are marked with red horizontal lines on the chart in Figure 1, but really the only one that matters is 4370. If that is broken, the others might fall soon thereafter. But as long as $SPX remains above 4370, its chart is bullish.

Since the chart of $SPX is the most important indicator, this means that a "core" long position should be maintained.

Equity-only put-call ratios are mixed. The Standard ratio (Figure 2) is rolling to a buy signal, gradually. The Weighted ratio (Figure 3) just made a new relative high, so it remains on a sell signal.

Breadth improved dramatically over the 4-day trading period beginning with last Friday, August 20th. Even so, the oscillators are split, with the "stocks only" being on a sell, while the NYSE oscillator is on a buy signal.

The most recent $VIX "spike peak" buy signal occurred just a week ago, on August 20th. The trend of $VIX is lower as it remains below the declining 200-day moving average, and so does the 20-day MA of $VIX. Those are all bullish signs for stocks.

In summary, retain a "core" long position because of the positive nature of the $SPX chart. If support at 4370 is broken, that would be a big negative. Meanwhile, confirmed signals in both directions can be traded around that "core" position.

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

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