Weekly Stock Market Commentary 3/15/2019

By Lawrence G. McMillan

Some are saying that a bullish interview by Fed Chairman Powell on 60 Minutes last Sunday was the launchpad for the rally this week. Whatever the reason, it is apparent that the bulls have a lot of fire- power left, and the move above 2820 could be significant. But a breakout above 2820 only means that the next resistance level -- the all-time highs at 2930+ come into play. On the downside, there is support at 2720 (last Friday's lows), 2680 (the early February lows), and 2600- 2620, as well as the ultimate support at 2350 (the December lows).

Equity-only put-call ratios are mixed in their signals. The weighted ratio rolled over to a sell signal over a week ago, and it remains on that sell signal now, although it has declined over the past three days. Meanwhile, the standard ratio remains on buy signal.

Market breadth has been volatile this week. At this time, both breadth oscillators are on buy signals, after having wavered slightly during the week.

Volatility has generally been drifting lower, and that is bullish for stocks. $VIX is at its lowest levels since very early October. We all know what happened later in October, so $VIX being at these low levels is a bit of an overbought condition and a warning sign to stay alert. But, $VIX will not present a problem for the stock market unless it closes above 17.

In summary, signals are mixed. However, so many people are watching the 2820 level that it is probably going to be fakeout of sorts. After a brief ensuing rally, $SPX will be back in the business of proving that there is still power left in the bullish case, and that will be a heavy burden to prove. Once again, straddle purchases seem to be the way to go.

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