Weekly Stock Market Commentary 10/28/2022

By Lawrence G. McMillan

The bulls are attempting to extend the rally that began in mid- October. Whether this fits in the broad category of October being a "bear killer" or not remains to be seen, but the breakout over 3800 on the $SPX chart this week was a positive development. As long as the Index holds that level, it is significant.

Overhead, there is resistance at 3900 (horizontal red line on the chart in Figure 1), and that is where the rally was repelled from a couple of days ago. If that level can be overcome, then we might see some more significant levels being achieved.

Equity-only put-call ratios continue to remain on buy signals, as they have made new relative lows this week. As long as they are declining, that is bullish for stocks.

Breadth has improved greatly, and both breadth oscillators are now on buy signals. There was another "90% up day" on October 25th. The "stocks only" oscillator is already into overbought territory, which is not necessarily a bad thing. That's what we like to see when $SPX is beginning a new leg upward.

$VIX has been on a steady decline since the stock market started rallying a couple of weeks ago. First of all, that means that the "spike peak" buy signal is still in effect. In addition, the trend of $VIX sell signal that has been in place since mid-September now appears to be in jeopardy.

In summary, we are still maintaining a "core" bearish position, although the spreads for that are out-of-the-money now. Meanwhile, we are taking other positions around that "core," in line with other confirmed signals that occur.

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