Weekly Stock Market Commentary 10/11/2019

By Lawrence G. McMillan

Violent market movements have followed nearly every piece There are both bearish and bullish signals in place, although the bears are being put to the test today.

$SPX has put in two spike lows this month -- one at 2892 and one at 2855. Those represent support. More important support levels exist near 2825 (the August lows) and 2720-2730 (the March and May lows). Overhead, there was resistance at 2960, which will be taken out this morning. Above there is a rather massive area of condensed trading in September, leading up to resistance at 3020- 3025 (the July and September highs, which are also the all-time highs).

Equity-only put-call ratios remain on sell signals. There has been fairly heavy put buying throughout this month, even though the market has generally been rallying for over a week now.

Breadth has been volatile as well. The "stock only" breadth oscillator just rolled over to a buy signal on October 10th.

$VIX has given a short-term buy signal as well, since it rose and spiked back down again. $VIX is closing below 17, so that is bullish as well, but it would be trouble if $VIX rose back above 17.

In summary, we have been maintaining a "core" bearish position since $SPX broke down below support at the beginning of October. A close above 2990 would change that. Meanwhile, we are also trading the oversold short-term buy signals that have arisen.

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