By Lawrence G. McMillan
One of the reasons that we favor $VIX derivatives as a portfolio, hedge rather than $SPX (or SPY) puts, is that $VIX is much more volatile. Also, $VIX protection is more dynamic. However, there can be some problems with the timing of a market’s breakdown and the convergence of $VIX derivatives with $VIX. In this article, we’re going to look at the details behind these actions, so that those who buy $VIX derivatives for speculation or protection might better understand what the potential problems are.
By Lawrence G. McMillan
The stock market remains volatile, but it has generally been rising since establishing lows near 1,120 on the Standard & Poor’s 500 Index nearly a month ago. The rise certainly hasn’t been uniform, though.
By Lawrence G. McMillan
Today’s stock market action is very much like last Friday’s. There is heavy selling, and it doesn’t appear that buyers have much desire to buy before the weekend. Last week, there was a rally attempt at 3pm (Eastern time), but it eventually failed, and prices closed on the low of the day. If you’ll recall, last week the selling continued on into the afternoon of the first trading day of the next week, before a strong rally surfaced. That could well be the case again this week.
By Lawrence G. McMillan
The chart of $SPX has developed a very interesting characteristic: there is a rising channel -- called a "pennant" on the chart. A breakdown below the lower boundary of the channel creates a very negative technical formation.
Equity-only put-call ratios, meanwhile, are quite bullish. They rolled over to buy signals last week and continue to decline.
By Lawrence G. McMillan
The stock market has been swinging back and forth in wide ranges, moving from deeply oversold to deeply overbought and back again with extreme moves.
By Lawrence G. McMillan
Buyers finally emerged yesterday afternoon and they have continued into today. In my mind, the complete impetus for this rally was the severe oversold condition that had emerged over the previous three days of heavy selling. Today’s rally is on track to being a “90% up day” – certainly in terms of “stocks only” data and potentially in terms of NYSE-based data as well. At the current time, on the NYSE, advancing volume is 12-to-1 over declining volume.
By Lawrence G. McMillan
Technical indicators have turned more bullish in the past week, so the current rally probably has more room to run. The chart of $SPX has taken on a slightly more bullish tone. This week $SPX overcame resistance at 1200-1210, although it has now fallen back below that level.
There is also resistance at 1230 -- the intraday high of both the last two trading days.
By Lawrence G. McMillan
MORRISTOWN, N.J. (MarketWatch) — After Federal Reserve Chairman Ben Bernanke’s speech last Friday, the market sold off rather sharply. But once that selling got out of the way, a strong bullish move took place, carrying the Standard & Poor’s 500 Index higher by more than 70 points in just over one full trading day.
By Lawrence G. McMillan
The market responded to a number of factors on Monday to put together one of the strongest days of the year. Perhaps too strong (for example, advancing volume on the NYSE was 34 times that of declining volume!). It was yet another "90% up day" and now there have been three such days without an intervening "90% down day." Odds are due for a short-term pullback. However, once that gets out of the way, we would expect higher prices in line with the improving technical indicators that we mentioned yesterday.
