Weekly Stock Market Commentary 11/19/2021

By Lawrence G. McMillan

Suddenly, there is once again a wide discrepancy in performance between two of the major indices -- $SPX and $NDX -- and the rest of the stock market. This is reflected by sell signals and negative readings in breadth and put-call ratios. However, the $SPX chart and the indicators involving $VIX and implied volatility remain bullish.

In any case, the $SPX chart is bullish as $SPX closed at another new all-time high on November 18th. There is support at last week's lows, at 4630. Below there, support exists at the old highs, 4525 4550.

Equity-only put-call ratios have rolled over to sell signals, as the internal deterioration in the market this week involved a sharp increase in put buying. To the naked eye, the little "curls" on the lower right of the charts in Figures 2 and 3 might just be a wiggle. But the computer analysis programs are quite certain that this is a change of trend and thus a sell signal.

Breadth has been the really negative indicator this week. The last four days have had negative breadth, and that the last two days have been abysmal. This is occurring while $SPX made a new closing high on November 18th. Needless to say, the breadth oscillators are on sell signals, and they are plunging.

In contrast to some of the negative indicators above, implied volatility indicators are mostly positive for stocks. The trend of $VIX remains lower, for example.

In summary, we are holding a "core" bullish position because of the strong $SPX chart. However, we will trade confirmed signals around that -- both buy and sell signals.

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