Stocks have tried to find a catalyst to spur them in one direction or the other, but they have been unable to do so. $SPX is locked into the 2120 - 2195 trading range. A clear breakout in either direction should be respected.
In the last few years, we have been trading the seasonal systems following June and September expiration. By "expiration," we mean the third Friday of the month (the "old" definition of "expiration"). The market usually declines in the week after June and September expiration. This doesn't hold true for March and December, for reasons that are not immediately clear, but that is somewhat irrelevant. This year, this seasonal trade could fit in well with the recent bearish tone of this market.
Last Friday, the market broke down through support – and did so in a big way. This current breakdown has changed the status of the $SPX chart from “bullish” to “neutral” at best. One could make a case for $SPX now being volatile within a trading range of 2120 to 2160. But if that 2120 support area is taken out, the chart will definitely be in a “bearish” status.
A violent rebound occurred yesterday, signaling that either a) Friday’s move was an aberration, or b) volatility has returned with a vengeance. Today, S&P futures are down 17 points in overnight trading, for no specific reason. There has just been a continual erosion all night long. That would argue for b) above. We are now getting mixed signals from some reliable indicators. These will sort themselves out, but for now there is some conflict.
$SPX had remained in a trading range for nearly two months, but now it has broken support at 2160 and that is significant.
The only negative indicators that we had as of yesterday were the equity-only put-call ratios, but the others will join in today. As you can see from Figures 2 and 3, the put-call ratios have been edging higher since making their lows in mid-August. That puts them on sell signals.
With the holiday weekend approaching, and attendance low because of it, the bears took a couple of shots this week at breaking $SPX down below support at 2160. They came close, but they couldn't do it. Thus, the $SPX chart remains positive, with support at 2160.
Equity-only put-call ratios have been edging higher all week, and they remain on sell signals because of it. But they aren't really rising much, so the sell signals aren't strong.
Lately, there has been commentary about how the Standard & Poors 500 Index ($SPX) has not made a 1% move (using closing prices) since July 8th. That’s 36 trading days and counting, through Monday, August 29th. Is that a long time? It certainly seems like it is. It's the longest period of time without a 1% move in over two years. However, we don’t like to go by “feel,” but rather by statistics, and the statistics show something a bit different.
