Weekly Stock Market Commentary 4/12/2024

By Lawrence G. McMillan

Selling has picked up this week, but mostly on the one big down day on which the CPI report came out. CPI itself wasn't up much (0.1%), but the implications are that rate cuts may not be coming soon (or at all), and that caused some knee-jerk selling. This has caused $SPX to retreat into the previous 5050- 5180 trading area, which is general support. There is resistance at 5260 near the all-time highs set just a couple of weeks ago. At this point, this is just a mild pullback, and it could prove to be healthy if $SPX can subsequently rally to new all-time highs. However, a close below 5050 is going to cause problems, because that is a technical level and thus technically-based selling would come in if that were to happen.

Equity-only put-call ratios, which have been toying with sell signals for weeks, have finally accelerated to the upside. Thus, confirmed sell signals are in place and will continue to be until these ratios eventually roll over and begin to trend downward.

Breadth has continued to be mired in a slump. Yes, there were a few days of positive breadth recently, but the breadth oscillators generated sell signals on April 2nd after some heavy selling that day, and they have remained on sell signals since then. Breadth conditions can change quickly, but so far these sell signals have remained in place.

$VIX has been rising slowly, as the market has faltered in the last couple of weeks, but it hasn't generated any sell signals yet. It is not in "spiking" mode yet, nor has it generated a "trend of $VIX" sell signal.

So, because $SPX has not fallen below critical support at 5050, we are maintaining our "core" bullish position, albeit with out-of-the-money calls. We will trade other confirmed signals around that.