The $VIX “spike peak” buy signal that is in place took four trading days to confirm. That is, $VIX spiked up to an intraday high of 17.95 on October 13th, but it did not complete the signal (by closing below 14.95) until October 19th – four trading days later. We are used to seeing $VIX spike up and right back down again, giving these buy signals on the same day that the intraday high was reached, or perhaps the next day.
Both the Crash of ‘29 and the Crash of ‘87 – two of the worst days in market history – occurred exactly 55 calendar days after the market had made an new all-time high. In other words, 55 days after the top, people are getting anxious. For those who believe in this theory, rather than coincidences, it supposedly has something to do with Fibonacci and/or biorhythms – who knows?
The chart of $SPX (Standard & Poors 500) continues to have a slightly negative bias to it. There is a clear series of lower highs on the chart. Moreover, the trend line from the January lows has been broken.
Equity-only put-call ratios are both technically on sell signals at this time, according to the computer programs that we use to analyze these charts. However, to the naked eye, they are more or less moving sideways.
The time of the year for the October seasonal trade is at hand. This is one of our best seasonal trades – to buy “the market” at the close of trading on October 27th, and to sell the position at the close of trading on November 2nd. However, we do not take the trade in years when there was not a pullback in October.
Time Warner (TWX) agreed to be bought by AT&T (T). The deal is worth $107.50 – consisting of $53.75 in cash and $53.75 in AT&T stock. The stock portion has collars: TWX shareholders will receive a maximum of 1.437 shares of AT&T, but will not receive less than 1.30 shares of AT&T. Those two limits on the shares are equivalent to AT&T stock prices of $37.411 and $41.349, respectively (Just divide the share limits into the $53.75 stock value to get those prices).
Stocks appear to be struggling a bit, but there hasn't been a decisive breakdown. The $SPX chart shows some negative trend lines, but the important area is support at 2120. As long as that holds, the bulls will remain in charge.
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This week, $SPX finally tried to break down. But support held at or near 2120, reinforcing that as a major support area. So that remains a key level the level at which the $SPX chart would turn bearish, if broken.
Equity-only put-call ratios are not buying into the bearish argument just yet. They are both moving lower on their charts, which maintains their buy signals.
The CBOE recently listed a Condor Index (symbol $CNDR). It is a benchmark index designed to track the performance of a hypothetical option trading strategy that sells a rolling condor spread. The index uses $SPX options, which settle for cash on a monthly basis (“a.m.” settlement). The hypothetical spread is rolled monthly.
Stock prices have dampened down into a very narrow trading range again. There is major support at 2120 and major resistance at the old highs (2195). A breakout from those levels would be significant.
