Free Weekly Stock Market Commentary 11/8/2024

By Lawrence G. McMillan

The Presidential election victory by former President Donald Trump proved to be a very positive catalyst for stocks. $SPX gapped to a new all-time high on the next trading day after the election, as did many other broad-based indices. Since there is no formal overhead resistance, the target for this move is the +4å "modified Bollinger Band" (mBB), which is currently at 6030 and rising daily.

There is now support at the old highs, in the area of 5870. Because the market was in a trading range for some time before the election, the entire zone between 5670 and 5870 can technically be considered support. However, a close back below 5870 would be negative psychologically and would cause us to relinquish our "core" bullish position. As it stands now, though, that "core" bullish position is still intact.

Equity-only put-call ratios remain on sell signals, despite the positive nature of things since the election. You can see from Figures 2 and 3 that the ratios have moved sideways for the past couple of days, but the computer programs that we use to analyze these charts continue to expect the ratios to move higher again thus remaining on sell signals. They are not that far above their recent October lows, and a move back below those October lows would cancel out the sell signals.

Breadth, on the other hand, has responded very positively to the election results and was even turning positive before the election. The breadth oscillator sell signals, which were fairly accurate but extremely short-lived, have been reversed to buy signals now.

The entire volatility space has been altered in the wake of the election -- something that was to be expected, since the options expiring just after the election were inflated because of that event. $VIX gapped down sharply and that confirmed a new "spike peak" buy signal as of the close of trading on November 6th.

In addition, $VIX has now closed below its 200-day Moving Average for the first time since last July! If it does so again today, that would finally terminate the errant trend of $VIX sell signal that has been in place this whole time.

We are maintaining a "core" bullish position, as long as $SPX continues to close above 5870. We will trade other confirmed signals around that "core." Also, deeply in-the-money calls should be rolled upward.