fbpx Blogs | Option Strategist


Trading range narrowing

By Lawrence G. McMillan

...As a result, not only is the $SPX trading range (1215-1230 on the downside, and 1275-1290 on the upside) still intact, but it is actually narrowing.  There is a downward-sloping trendline overhead, and an upward-sloping trendline beneath.  Something is going to have to give here – and soon.  The fact that volatility remains high and put volume remains heavy should be a contrary, positive indicator, but as long as the market continues to react violently to these European news "bits," there will continue to be demand for protection.

Portfolio Protection, Revisited

By Lawrence G. McMillan

We have written about the subject of protecting a portfolio of stocks with derivatives several times over the years, although it’s been a while (Volume 19, Numbers 6 and 12 had articles on the subject).  Recently, some subscribers have inquired about how to calculate  the amount of protection they need.

Weekly Commentary 11/11/2011

By Lawrence G. McMillan

For the second week in a row, a rising market was blindsided by negative "macro" news out of Europe and suffered a violent downturn as a result. What has been quite astonishing is the speed with which the last two declines have occurred. When all is said and done, though, support at $SPX 1215-1220 is still in place.

The equity-only put-call ratios are clinging to their buy signals. Market breadth continues to swing wildly from day to day. Most recently, it is back on a buy signal.

Bears counter-punch

By Lawrence G. McMillan

After the nasty decline early last week, the stock market pulled itself together and rallied. The Standard & Poor’s 500 Index bounced off the general area surrounding 1,220, and thus the selling that had occurred on Oct. 31 and Nov. 1 — severe as it was — merely looked like a quick retest of the 1,220 breakout level (see chart below). As the market then rallied back towards the 200-day moving average, the technical indicators began to strengthen to the point where all were on intermediate-term buy signals entering today.

European worries overwhelm positive technicals

By Lawrence G. McMillan

Yesterday was a strong day, backed by technical factors across the board.  But forget about it, because tonight the market is getting absolutely crushed.  S&P futures we down as much as 32 points, and are down about 26 right now.  The problem?  Italian interest rates are rising dramatically – particularly noticeable, apparently, on the 10-year notes.  The media is saying that the Italian bonds yields are a "crisis levels," whatever that means.

Velocity, not volatility

By Lawrence G. McMillan

Velocity.  That’s a term more commonly found in physics or aeronautical engineering or something like that, but stock market participants are becoming all too familiar with the word, even if they have no idea what v = Δx/Δt means.  Volatility is a measure of the size of market movements, but velocity is just the raw directional speed with which they occur.  After observing the market this week, I am more inclined to call what we are seeing as velocity, and not volatility.

Weekly Commentary 11/4/2011

By Lawrence G. McMillan

When the dust has settled, this looks like little more than a pullback from a slightly overbought condition to test the breakout level (at 1220). To sum up the $SPX chart: there is still support at 1220, and as long as that holds, it's a bullish chart.      

Equity-only put-call ratios have remained on buy signals all week, despite the heavy selling earlier in the week.      

Also, the breadth oscillators are back on buy signals once again.

In focus: Bulls being tested

By Lawrence G. McMillan

Monday and Tuesday had all the earmarks of panic selling, but it has shaken the confidence that had been gathered throughout the strong October rally.

One can hardly rely on technical levels at this time

By Lawrence G. McMillan

Yesterday had all the earmarks of panic selling, but it has shaken the confidence that had been gathered throughout the strong October rally.  Once again, it seems that the majority of the major players are still acting in a like manner daily, so that these wilder-than-usual swings take place. $SPX sliced all the way down through the supposed support at 1220-1230, and traded as low as 1215.

Weekly Commentary 10/28/2011

By Lawrence G. McMillan

Today’s move saw $SPX blow right through the resistance at 1260 and also through the 200-day  moving average at 1272. Those are both significant levels to have overcome.  The market may have to spend some time around the 200-day moving average, as it often does when it passes through that level, but the next higher targets of 1310 and then the yearly highs at 1350-1370 should be within range fairly soon.

Equity-only put-call ratios remain on buy signals.


Option Strategist
Blog Search

Trading or investing whether on margin or otherwise carries a high level of risk, and may not be suitable for all persons. Leverage can work against you as well as for you. Before deciding to trade or invest you should carefully consider your investment objectives, level of experience, and ability to tolerate risk. The possibility exists that you could sustain a loss of some or all of your initial investment or even more than your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and investing, and seek advice from an independent financial advisor if you have any doubts. Past performance is not necessarily indicative of future results.
Visit the Disclosure & Policies page for full website disclosures.