The swift rally that took place over the last week has left the indicators in a mixed state, with some of the longer-term indicators still in a bearish mode after the major overbought conditions that existed in late January. On the other hand, short-term indicators gave some oversold buy signals, and those have certainly carried the day this week.
Watch the recording of Lawrence G. McMillan's "The Current State of The Market-Predicting Option Indicators" Festival of Traders webinar from yesterday below.
Watch option strategist, Lawrence G. McMillan, discuss the current state of the stock market.
The huge rally in stocks that began on October 4th, 2019, is in jeopardy. A couple of large down days have broken the steepness of the uptrend, but not the uptrend itself.
So, the $SPX chart is weakening, but hasn't completely capitulated to the bearish case yet. There is resistance at 3340 (the all-time highs) and there is support, as noted, at 3210. So if it continues to bounce around in that range, it would just be "re-generating," but a breakout in either direction should be significant.
$SPX has finally broken down somewhat and sell signals have arisen in many areas. This has been enough for us to declare our “core” position as bearish, but the bulls still have a chance to rescue things. To the media, the reason for the selling is mainly the coronavirus, or perhaps earnings, or maybe Boeing, but in reality the market was so overbought that any reason for selling was going to cause some decline.
We first wrote about this indicator in the August 10, 2012, issue (tos2115.pdf, if you’re looking for the file name in the back issues). Excerpting from that article:
President of McMillan Analysis Corp., Lawrence G. McMillan, discusses the current state of the stock market and his option-oriented indicators. Watch below:
The bullish trend of $SPX remains intact. Having said that, the $SPX chart is extended (overbought), as are many other indicators. $SPX is nearly 60 points above its rising 20-day moving average. Hence a fairly sharp pullback of 60 or 70 points wouldn't change the trend, but it might be a bit shocking to the bulls.
February 2018 was a very nasty month for stocks. For some time, we have been mentioning the similarities between current action and that of late 2017 and early 2018: a long rally has taken place, accelerating in January; there have been multiple failed mBB sell signals; put-call ratios are extremely overbought; new highs have completely dominated new lows, etc. And others are watching this as well. In late January 2018, a number of sell signals occurred almost all at once: there was an mBB sell signal, breadth oscillator sell signals, equity-onlyput-call ratio sell signals, VIX began to rise, and new lows exceeded new highs. All of these occurred on or before February 1st, 2018. By February 2nd, the market was collapsing and by February 9th, 2018 – in a matter of just 5 trading days – the entire rally of over four months had been wiped out.
Join option strategist, Lawrence G. McMillan, as he discusses the current state of the stock market and his option-oriented indicators. Watch below:
