The $SPX chart in Figure 1 is still a bullish chart. The moving averages are all trending higher. There is support at 2544 (this week's intraday reversal low), with more important support at 2510 and 2480. A close below 2510 would be somewhat bearish, and a close below 2480 would change the chart to an outright bearish one, in my opinion. But at current levels, there is room for a modest correction without completely rolling over into a bear market.
The S&P 500 Index ($SPX) has now made a new all-time closing or intraday high on 15 of the last 17 trading days. When the bears fail to capitalize on a selling opportunity such as Thursday, the bulls come back with a vengeance. The $SPX chart remains positive, with support at 2510.
Equity-only put-call ratios have turned bullish once again. Both of these ratios have begun to decline again, and when put-call ratios are declining, that is bullish for stocks.
The major indices pushed to new all-time highs again this week, although at a snail's pace. The $SPX chart is in a strong uptrend, and that is simply bullish. In the traditional sense, there is support at 2510, 2480, and 2400.
The equity-only put-call ratios have both rolled over to sell signals. These sell signals are confirmed by the computer programs that we use to analyze these charts, as well as by the naked eye (well, sort of).
The strength of the market was on full display this week. The indicators are still in bullish agreement with this move, but there are a couple of potential overbought sell signals setting up.
One overbought condition is that $SPX is above the "modified Bollinger Bands" shown in Figure 1. There is support at 2510, 2480, and 2400.
Finally, there has been some follow-through movement to the upside. $SPX has made new all-time closing and intraday highs on the last two days. This keeps the $SPX chart bullish, of course. There is still the strong support at 2480 (the level from which the last major breakout occurred), and now there is also support at 2488 -- last week's lows.
Intercept Pharm (ICPT) was crushed on Thursday, falling 24 points after the FDA issued a warning on an ICPT liver drug. The stock had previously been in a negative technical pattern, having recently broken down below multiple support at 104. It had tried to rally back, but couldn’t overcome resistance. Stock volume patterns are terrible. There is resistance at 86-90.
$SPX had made either new intraday all-time highs or closing all- time highs for eight consecutive trading days until yesterday, September 21st, when it did not. The chart remains bullish, with major support at 2480.
Equity-only put-call ratios remain on buy signals. There is a slight wiggle in the standard chart (Figure 2) but the computer analysis laughs that off. Both of these ratios are declining rapidly, as call buying has been dominant since the September 11th breakout by $SPX.
For a long time, from 2006 to 2017 (with the exception of a lone sell signal in 2014), this system didn’t generate any signals as $VIX traded at normal levels of 15 and above. But when $VIX dropped to extremely low levels this year, these sell signals began to appear again. We had previously written about this system in issues dated Jan 27th and July 16th. Simply stated, the system is this:
One system that we normally trade is the one that says the market declines the week after September expiration. This definition of “expiration” goes back to the days before weekly options, so it refers to the third Friday of the month (today, September 15th). Last year, this system did not work, but it has produced profits in 22 of the last 27 years. The track record is shown below. Note that a negative number is “win” (i.e., the market went down) while a positive number is a “loss.”
On Monday, September 11th (a date we will never forget), $SPX broke out to new all-time highs. There hasn't been a lot of follow-through after that, but those highs have been retained.
The importance of these new highs is that they distinctly turn the charts positive. The $SPX chart now has support at 2480 (the old highs), as well as at 2460 and every 20 points down, all the way to 2400.