July $VIX settlement took place this morning. The official settlement price was 19.10, just slightly below last night's $VIX close of 19.21. All outstanding June futures and options contracts will settle at that price. For example, if you own a July 20 put and didn't sell it prior to today, it would settle for 0.90 ($90 per contract), since it is 90 cents in the money (20 minus 19.10).
The market is finally staging a strong rally. Is it just a “Turnaround Tuesday” thing, or have the bears fumbled the ball (they weren’t moving it very well anyway)? I’m sure there’s plenty of room for debate regarding either of those stances, and both are probably true to some extent.
Today’s move solidifies support on $SPX at 1295-1300, and that remains an important area. On the upside, the important level to overcome would be the 1330 level.
Put-call ratios are excellent measures of the sentiment of the general option-trading community. When the sentiment is that "too many" people are buying puts or calls, it is worthwhile to pay attention, for the majority are normally wrong at major turning points, and their actions can be interpreted into a market trading signal.
Those who are familiar with our strategies concerning takeover rumors and bids know that we eschew most rumors, preferring instead to concentrate on situations in which either a) the company has announced that it is “exploring strategic alternatives” – effectively putting itself up for sale – or b) has a bid in hand, but the stock is trading higher than the bid – indicating that perhaps a higher bid is forthcoming from another party. We have written about this approach in several feature articles in the past.
The market action this week has been quite bearish and, frankly, quite out of character in terms of the indicators, but it may also be a rather severe reaction to the overbought conditions that had built up.
The S&P 500 Index ($SPX) had strong upside momentum a week ago, but ran into resistance very near the April highs.
Equity-only put-call ratios are bullish and have remained bullish even during this week's decline.
In this video recorded on June 17th at The TradersExpo Dalls, Larry McMillan discusses the predictive power of the put-call ratio indicator and predicts the rally at the end of June 2011. Larry also talks about the rare CBOE equity only put-call ratio signal and the total put-call ratio and what they mean for the market.
The market’s still-overbought condition, coupled with some negative news regarding financial problems in Italy, resulted in a severe down day yesterday – a true “90% down day,” as it turned out. A late-day rally seemed to ease things a bit, but overnight the situation has been exacerbated, and S&P futures are down another 6 points in Globex trading (they were actually down 23 at one point, but positive inflation news out of England brought the markets back a great deal).
The stock market continued its bullish explosion this week. $SPX broke through its previous down trend line last Friday, and has now overcome the late-May high. All that remains is a test of the post-2009 highs at 1370.
Equity-only put-call ratios turned bullish when they peaked and began to fall. These are intermediate-term buy signals.
Market breadth has been very strong during the rally. Breadth indicators remain on buy signals, but are now very overbought.
Did you miss Larry McMillan at the Traders Expo Dallas 2011? Well if you did, you're in luck because you can view a recording of Larry's "Using Option Data as a Forecasting Tool" seminar for free at Moneyshow.com. All you have to register for the site and you will gain access to Larry's talk along with videos from many of the other speakers at the event.