The fact that $SPX has made new closing and intraday highs is bullish. As for the $SPX chart, there should be support at the old breakout level near 4700, although that has not been tested yet. If $SPX should fall back below there, it would be back in its old trading range, with support at 4500. However, a pullback of that magnitude while not necessarily setting off bear market alarms would remove the current "bullish" status from the $SPX chart.
Over the last week, new 52-week Lows have been dominating New 52-week Highs, across all three data sets: NYSE, NASDAQ, and “stocks only.” The day after $SPX rallied to its all-time high close at 4712, there were over900 new 52-week lows in optionable stocks, and over 600 in NASDAQ. So, with $SPX just off its highs, there were hundreds of stocks making new 52-week lows. That is a stark picture of just how much negative divergence there is in this market. Put-call ratios and market breadth also can attest to this.
Join Larry McMillan as he discusses the current state of the stock market on Monday, December 13, 2021.
Stocks came roaring back this week, after a massive oversold condition spurred the rally. As is typical for an oversold rally, $SPX rose all the way to and through its declining 20-day Moving Average. That brought it back almost to the old highs (4705) where it has met resistance before and did again. Meanwhile, the lows of last week at roughly 4500 are support, and there is also support at 4300 (the early October lows). So, there is a possibility that $SPX is still in a trading range (yellow area on the chart in Figure 1).
With the market plunging this morning on news of a new COVID variant out of South Africa causing travel restrictions, we are going to attempt to work that into the market comment even though our data does not incorporate today's (Nov 26) trading. There is still resistance for $SPX near 4700, but more importantly, the $SPX chart will turn negative on a close below 4630.
We have been trading this seasonal spread annually every year since 1994, except for 1995. Last year, we rebounded with a nice gains.
We did not trade the October Seasonal this year, but I wanted to bring you up to date on the statistics for the trade now that the seasonal period has ended (it began with the close of trading on October 27th and ended with the close of November 2nd). This year, that was an $SPX gain of 108.88 points – the second largest point gain the 43-year history of the system. Percentage-wise, it was 2.4%, and that has been bested many times. Still, it was not a good trade to miss...
All of the major Indices have broken out to new all-time intraday and closing highs. This includes the "usual" $SPX, $DJX, and $NDX, but now they have been joined by the Russell 2000 ($RUT; IWM), although $RUT and $DJX did not join the party yesterday (November 4th). These charts are positive, and that dictates holding a long "core" position. There should be support at the breakout levels, which for $SPX is the 4525 - 4550 area.
During the last market decline (basically, during all of September and a little bit in October), $VIX just wasn’t too “worried” about the decline in stocks. Yes, one can see, from the chart of $VIX, that it had been slowly rising since the beginning of September, exactly in line with the downtrend in SPX which began at that same time. However, except for the one spike upward in mid-September, $VIX didn’t rise sharply. Perhaps if the decline in stocks had accelerated, $VIX would have responded better, but in reality, $VIX did not prove to be much of a hedge against losses in the stock market during this most recent stock market decline. This happens from time to time, the worst case probably being December 2018.
After opening lower on Monday, $SPX put on a strong rally, and closed near the highs of the day. Some of the internals did not follow as strongly, but for now the picture remains a more positive one. The downtrend line in $SPX has been broken, and the Index is pushing towards all-time highs at 4545. There are still a couple of gaps below current prices, and it would be a trend-changer if $SPX were to fill the lower one and close below 4372.
