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In focus: Buy signals take hold

By Lawrence G. McMillan

The week leading up to the Fourth of July holiday was a “perfect storm” of bullish activity, or at least it turned out that way. There were several technical, seasonal, and even some fundamental factors at work. There was an oversold condition, month-end window dressing, first-of-the-money seasonal factor, pre-holiday bullish seasonal patterns, and even some help from Europe (delaying the Greek credit crisis). Add it all together and it was one of the strongest weeks in recent memory.

Intermediate-term Indicators Bullish

By Lawrence G. Mcmillan

Friday wound up one of the strongest weeks in stock market history. It was a perfect storm of events, topped off by a pre-holiday, thin trading session on the first day of the month. There are now some fairly extreme overbought conditions in the breadth oscillators. However, as we’ve explained before, these are actually bullish conditions for the new upside breakout. Of course, in the very short term, the market needs to slow down a bit and regroup.

Weekly Commentary 7/1/2011

By Lawrence G. McMillan

A huge stock market rally developed this week, due to a number of factors.  The S&P500 Index ($SPX) entered the week in a downtrend. Depending on how you look at things, it might still be in a downtrend (see Figure 1, blue line).  But it did overcome resistance at 1300 (last week's high) and 1310, so that is a positive development.

Put-call ratios have reached extreme levels, but have stubbornly been refusing to give confirmed buy signals.

In focus: Bulls trying to establish a foothold

By Lawrence G. McMillan

The S&P 500 Index is trying to reverse its downtrend, and appears that it has at least partially done so.

The downtrending 20-day moving average of SPX SPX +0.73%  is at about 1297, and the highs of last week were at 1298.  So a close above that level would change the SPX chart from bearish to neutral.  A close above 1310 would turn it bullish.

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Removing the "bearish" designation?

By Lawrence G. McMillan

If the current rally levels hold, it will improve the $SPX chart to neutral, removing the "bearish" designation that we have had on it for weeks.  In fact, if $SPX can close above 1310, we would upgrade our classification of the chart to bullish. 

The rally is being backed by technicals that are turning bullish, too.  $VIX is now at 17.41, below the 17.70 level that we said would constitute a buy signal for that index, too.  As with $SPX, this move in $VIX breaks the bearish trend that was in place.

Selling Weekly Put Options -- new analyses available

Weekly put option sales have been added to the analyses in The Strategy Zone (SZ) and in the Option Work Bench (OWB). 

Subscribers to The Daily Strategist that follow our weekly SPY sales, are up +18% in five months, in the ongoing position that we are running in that newsletter.

Weekly Commentary 6/24/2011

By Lawrence G. McMillan

Oversold conditions had built up over the past couple of weeks, and they finally spurred a decent rally -- mostly all in one day this week (Tuesday).

The chart of $SPX itself remains in a bearish downtrend, with the series of lower highs and lower lows.

Equity-only put-call ratios raced higher over the past two weeks, reaching oversold status as the market continued to decline.  Then, when the rally unfolded, the standard ratio rolled over to a buy signal, while the weighted ratio topped out as well.

In Focus: Oversold Rally Fizzles Out

By Lawrence G. McMillan

After some major oversold conditions developed, the stock market managed two tepid rally days and then one strong one. That brought the Standard & Poor’s 500 Index back up to its declining 20-day moving average, which is usually about the full extent of an oversold rally.

Oversold Short Term Buy Signals

By Lawrence G. McMillan

The following was excerpted from the market commentary in this morning's Daily Volume Alerts Newsletter, which is sent out each morning before the market opens.

Daily Commentary 6/20/2011

By Lawrence G. McMillan

After a shaky overnight session, when S&P futures traded down 10 points at one time, and some opening jitters today (when $VIX traded above 23), the market has settled down and rallied.  The rally is another one of those weak, rather pathetic affairs, but that apparently is all that the oversold conditions can generate at this time.

We continue to see the intermediate-term indicators in a negative state, while short-term oversold conditions increase.


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