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By Lawrence G. McMillan

As for the $SPX chart, it once again shows a lower high and lower low, since that February top. Moreover, the latest rally attempt, which began on March 13th, appears to merely be an oversold rally. It sprang from several rather severe oversold conditions, and it has now run into trouble at or just above the declining 20-day Moving Average a "classic" oversold rally.

There is currently resistance at 4040 (this week's high), but the stronger resistance is the entire area between 4080 and 4200 (the trading range from early February), which has already been tested once and held (in early March). Meanwhile, the broad support area from 3760 to 3850 (the range from late December 2022) is still in place. The most recent rally began from that area.

Equity-only put-call ratios surprisingly generated buy signals this week. The standard ratio (Figure 2) had moved to new highs on its chart, so it was in a very oversold state. Thus, a buy signal from that level is not too surprising. The weighted ratio, on the other hand, is still relatively low on its chart, but it rolled over enough that a buy signal occurred there as well.

Breadth has been terrible, and so both breadth oscillators remain on sell signals, and they remain in deeply oversold territory.

The signals and indicators surrounding volatility are general bullish at this time. There is a $VIX "spike peak" buy signal in place from March 14th and March 16th (overlapping signals). Moreover, with the mini-financial crisis seemingly past, $VIX itself is now back below its 200-day Moving Average, so that generates a new trend of $VIX buy signal.

Here's an interesting aside: I am one of the people surveyed in the CNBC Economic Survey. I think there are 30-some traders and economists surveyed. I am the only one who doesn't think inflation has already peaked! I find that very unusual. What this means, of course, is that if there are some bad inflation reports somewhere down the line, they could cause havoc, because everyone has already been acting on their beliefs that inflation has peaked.

As noted earlier, we are maintaining a "core" bearish position as long as the $SPX chart is in its current downtrend. In addition, we are trading confirmed signals around that "core."

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

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