fbpx Weekly Stock Market Commentary 10/8/2021 | Option Strategist

Weekly Stock Market Commentary 10/8/2021

By Lawrence G. McMillan

Sentiment is changing nearly daily, producing wide swings in $SPX. But the Index is still in a downtrend, with lower highs and lower lows on its chart (blue lines in Figure 1). The lower end of the range is just below 4300, as there were several rather strong reversals from that area in the past week. On the upside, there is resistance up to 4465. A broader view shows three support areas (horizontal red lines in Figure 1) at 4233, 4160, and 4060 and, of course, resistance at the all-time highs (4545).

Equity-only put-call ratios remain on sell signals. As you can see from Figures 2 and 3, both ratios are still racing higher. That is bearish for stocks, in general. The weighted ratio has reached its highest level in over a year, which might make it "oversold," but these indicators won't turn bullish until they roll over and begin to trend downward.

Market breadth has continued to be strong enough to keep the breadth oscillators on buy signals, even throughout some pretty nasty down days in the last couple of weeks.

Implied volatility indicators are somewhat bullish. First, the $VIX "spike peak" buy signal of October 1st remains in place. Next, the trend of $VIX is in more jeopardy, however. On September 30th, the 20-day Moving Average of $VIX crossed above the 200-day MA (circle on the chart in Figure 4). It is still above.

Seasonally we are in a negative period for stocks. Usually, selling begins in September and terminates in October (sometimes violently).

In summary, the indicators are certainly mixed. Prior to the huge upward reversal that took place on October 6th and 7th, the outlook was more bearish in that $SPX was trending lower and $VIX was trending higher. Those trends are certainly coming into question right now, but for the time being, we are maintaining a "core" bearish position because of those trends. Of course, we are trading other signals around that "core" position.

 

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

The Option Strategist Newsletter $29 trial

Share this

Option Strategist
Blog Search

Recent Blog Posts

Trading or investing whether on margin or otherwise carries a high level of risk, and may not be suitable for all persons. Leverage can work against you as well as for you. Before deciding to trade or invest you should carefully consider your investment objectives, level of experience, and ability to tolerate risk. The possibility exists that you could sustain a loss of some or all of your initial investment or even more than your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and investing, and seek advice from an independent financial advisor if you have any doubts. Past performance is not necessarily indicative of future results.
Visit the Disclosure & Policies page for full website disclosures.

-->