The market, as measured by the Standard & Poors 500 Index, finally broke out of the tight 1190-1220 range this week — to the upside. Since then there have been two attempts to pull back, but they have met support near 1220, and so that is now a confirmed support area.
The stock market remains volatile within an ever-narrowing range. For ten days now, $SPX has traded within a range of 1190 to 1230. Clearly a breakout of that range should be significant.
Equity-only put-call ratios are a bit mixed. The weighted ratio rolled over to a buy signal about two weeks ago, but the standard ratio has continued to climb -- thereby remaining on a sell signal.
Breadth indicators continue to remain on buy signals, and they have reached varying degrees of overbought.
MORRISTOWN, N.J. (MarketWatch) — The stock market, as measured by the Standard & Poor’s 500 Index, reached a very important point: the top of the trading range, near 1,220-1,230. The trip to get to this point has been an interesting one.
A week ago, we stated that the market was at a crucial juncture — that it had rallied to the 1,220-1,230 area on the Standard & Poor’s 500 Index and that it was either going to break out to the upside or retrace to the bottom of the trading range. What has happened is that the market has remained volatile around that area, but that so far there has not been a resolution of the bullish and bearish forces.
The October VIX Futures settled at 33.15 this morning, down 57 cents from last month's settlement. This is the third month in a row that the futures expired with a value above 30. This hasn't occured since the 2008 crash.
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Traders of volatility derivatives -- futures, options, or exchange-traded funds and notes -- often wonder why the VIX, or the Chicago Board Options Exchange Market Volatility Index, moves much more violently than do the derivative contracts that are based on it.
This market is now presenting a difficult choice. It has continued to gain ground almost every day, adding to its overbought condition (the "stocks only" oscillator is above +600, for example), and it is right at the top of the trading range. In addition, futures traded up 7 points or so overnight. In the past two months, these conditions would be screaming for a sell, and indeed the market is having its worst day in a while, by far, today. However, this seems to be a very delayed reaction.
The pace of the recent rally was such that the market is now short-term overbought. For all the movement, $SPX is still within the confines of a wide, volatile trading range -- which now extends from 1070 to 1230. A breakout above 1230 would be bullish, although there is more resistance at 1260.
Equity-only put-call ratios aren't as clear as they sometimes are. The weighted ratio has moved back to a buy signal, but the standard ratio really hasn't.
We have detailed many oversold conditions in the last two months, and in this article we’re going to look at a couple that haven’t been previously discussed. They are 1) the frequency of “90% days” and 2) Composite Implied Volatility (CIV) above 90%. Furthermore, we’ll review other general oversold conditions as well.