Weekly Stock Market Commentary 2/16/2024

By Lawrence G. McMillan

On Tuesday (February 13th), there was a negative CPI report, and the market fell sharply in two heavy waves of selling. But late in the day, buyers came in and they have been buying the market for the entire rest of the week. So, this seems very similar to the sharp, one-day selloff of late January. It eventually amounted to nothing.

$SPX closed at a new all-time high yesterday, $SPX has near-term support levels at 4920 and 4845 the lows of those two sharp, but short-lived selloffs. Below there, support in the 4680-4800 area should be more substantial. A close below 4680 would be something of a problem, for it would change the scope of the $SPX chart from bullish to bearish.

Equity-only put-call ratios have gotten more overbought and more bullish, as they are dropping rapidly now. The weighted ratio is at levels last seen in November 2021. The standard ratio isn't that low, but it is near the lows of the last year once again. When these ratios are at or near the bottom of their charts, they represent an overbought condition for the stock market, but they won't confirm sell signals until they begin to trend higher.

Breadth had been struggling, and the breadth oscillators were on sell signals as recently as a week and a day ago. But breadth has since then -- even with the "90% down day" on February 13th. Both breadth oscillators are now in modestly overbought territory having canceled out any recent sell signals. Frankly, I'd like to see the breadth oscillators a lot more overbought than this, what with $SPX making another new all-time high, but it is what it is.

Perhaps the one big difference between the previous sharp one- day selloff in $SPX in late January and the one this week was that $VIX jumped sharply higher this time. On February 13th, $VIX spiked up to 17.94 and closed at 15.85. That close was above the 200-day Moving Average, so the trend of $VIX buy signal was stopped out. But that spiking mode didn't last long, and by the very next day, $VIX had closed all the way back down at 14.38. Thus a new "spike peak" buy signal was generated.

In summary, we continue to maintain a "core" bullish position because of the positive nature of the $SPX chart. Moreover we will trade other confirmed signals around that "core."