Free Weekly Stock Market Commentary 10/9/26

By Lawrence G. McMillan

Things seemed so promising on Tuesday, when $SPX traded at new all-time intraday and closing highs. But almost immediately after the market closed that day, selling set in. While it hasn't been heavy selling, it has pushed $SPX back down into the previous trading range. Essentially, the upside breakout wasn't a breakout at all, but merely a slight extension of the trading range.

The net result is that there is still resistance at the all-time highs, 7820-7844. There is near-term support at 7720, then stronger support as shown by the red horizontal line in Figure 1, at 7580-7620.

The market internals have been negative for some time (and still are).

Equity-only put-call ratios remain split. The standard ratio remains on a sell signal as it has moved to a new relative high on its chart (Figure 2). The weighted ratio, however, is in something of a downtrend and so it is on a buy signal.

Breadth has tried to improve. There have been several days recently with positive breadth, but that wasn't enough to roll the breadth oscillators over to buy signals. Then the massively negative breadth day of October 7th pretty much put everything back where it was: the breadth oscillators remain on sell signals

The $VIX chart gives us two buy signals for stocks: 1) the "spike peak" buy signal (green "B" on the chart in Figure 4), which has another seven trading days to run (and which would be stopped out by a $VIX close above 18.94), and 2) the trend of $VIX buy signal (pink "B" on the chart in Figure 4), which will remain in effect until $VIX closes above its 200-day Moving Average for two consecutive days. That 200-day MA is currently just above 18.

In summary, things are pretty much the same: the $SPX chart remains neutral to positive, and the $VIX indicators are positive for stocks. But the market internals are decidedly negative. We will wait for confirmed signals before taking new positions. Meanwhile, continue to roll deeply in-the-money options.