Weekly Stock Market Commentary 10/7/2016

By Lawrence G. McMillan

Stock prices have dampened down into a very narrow trading range again. There is major support at 2120 and major resistance at the old highs (2195). A breakout from those levels would be significant.

Equity-only put-call ratios have been declining for the past couple of weeks. The standard ratio has been on a confirmed buy signal for at least that long, and you can see from the chart that it is declining rather steadily (Figure 2). The weighted ratio has finally chimed in with a buy signal as well, although it's not as clear on that chart (Figure 3).

As one might expect, given the small trading range of $SPX, market breadth has not been particularly strong or weak. For the record, both breadth oscillators are currently on sell signals.

Volatility indices have probed higher a few times intraday, breaking above 15 a couple of times, but generally closing in the 13-14 range. As long as $VIX continues to hover at low levels below 15, it is a benign state for stocks.

In summary, all of the indicators seem to be rather mixed, awaiting some direction from $SPX. For now, we remain neutral on the market, awaiting an $SPX breakout from this tight trading range.

This Market Commentary is an abbreviated version of the commentary featured in The Option Strategist Newsletter.