Despite some selling this week, support at $SPX 1080-1085 has once again held, and therefore the overall bullish trend of the market persists. Some of the technical indicators have weakened, but as long as that support holds, they are not important. On the upside, the resistance at 1110 remains in place as well.
Our breadth oscillators have given six separate sell signals over the last month, as $SPX has been unable to break out on the upside. That is certainly a negative sign, and those sell signals remain in place today.
Equity-only put-call ratios have been unreliable ever since heavy hedging activity began last summer. That activity seems to be abating now, so we are tentatively looking to use the equity-only ratios as trustworthy market indicators again. They, too (like breadth) have generated sell signals this week.
VIX Through 12-11-09
Volatility indicators are more positive. Volatility indices themselves ($VIX and $VXO) continue to decline, and that is generally bullish for stocks.
In summary, both bulls and bears are frustrated — and will likely remain so until a breakout occurs.
The S&P 500 Index ($SPX) has still not been able to break out of its 1080-1110 trading range on a closing basis. This is a very tight range that has lasted for nearly a month (since November 9th, actually). Our indicators are modestly bullish, so the odds slightly favor an upside breakout.
The $SPX chart remains mostly bullish. The rising trend line connecting the March and October lows is at about 1070 and rising. Coupled with the just mentioned support at 1080, this means that the trend is still bullish. However, a close below 1070 would be problematic for the bulls.
Equity-only put-call ratios have begun to clearly decline and thus generate buy signals. In normal times, we would be encouraged by that fact, but with the distortions caused by the heavy hedging activity since July/August, we still view the signals from these put-call ratios tentatively. These are not our primary indicators at this time.
Market breadth, on the other hand, has been a much more accurate signal during the rally since March. Breadth has given a sell signal each time that $SPX has approached the top of the trading range and then fallen back. Today was no exception, as yet another sell signal has been issued after the $SPX failure to break out on the upside.
VIX Through 12-4-09
Volatility indices have generally declined, with both $VIX and $VXO near yearly lows earlier today. Declining volatility is bullish for the broad stock market.
In summary, $SPX has been unable to break out of the trading range. Perhaps Friday’s Unemployment Report will provide a catalyst for the breakout. Traders should wait for the breakout before taking speculative positions.
[An unexpectedly good unemployment report did send the S&P 500 up 1.5% at 10 AM but it quickly fell back and closed up 0.5% at 1106.]
Mohamed El-Erian CEO of PIMCO and co-CIO with Bill Gross talks about the Dubai Debt Crisis. The markets have gone up indiscriminately on liquidity alone. The money from the Fed hasn’t made it to the real economy so all asset classes went up. Dubai World needs six months to resume debt payments is an event that triggers a re-pricing of assets.
Asian markets were down 5% on the news but the S&P 500 futures were down 24 on Globex over Thanksginving, but today the damage was 19 points. So it looks like the market considers it contained.
The underlying philosophy here is skepticism and mean reversion. Dan Sheridan talks about a bearish calendar spread on the retail HOLDR, RTH.
Again, when everyone is talking about it, it is near the top. Dan Sheridan has two trade ideas, one bullish and one bearish for GLD, the gold SPDR that holds bullion.
I worked for seven years at Millennium Partners, now a large hedge fund. I started there as a quantitative analyst for a currency trading group.
After four years, that group disbanded and I traded baskets of stocks hedged by future contracts.
In March 2003 I started an investment partnership which buys a particular type of high return [...]more →
Twitter: TradeNaked
Everyone is Frustrated
Weekly market commentary from Larry McMillan:
SPX Through 12-11-09
Despite some selling this week, support at $SPX 1080-1085 has once again held, and therefore the overall bullish trend of the market persists. Some of the technical indicators have weakened, but as long as that support holds, they are not important. On the upside, the resistance at 1110 remains in place as well.
Our breadth oscillators have given six separate sell signals over the last month, as $SPX has been unable to break out on the upside. That is certainly a negative sign, and those sell signals remain in place today.
Equity-only put-call ratios have been unreliable ever since heavy hedging activity began last summer. That activity seems to be abating now, so we are tentatively looking to use the equity-only ratios as trustworthy market indicators again. They, too (like breadth) have generated sell signals this week.
VIX Through 12-11-09
Volatility indicators are more positive. Volatility indices themselves ($VIX and $VXO) continue to decline, and that is generally bullish for stocks.
In summary, both bulls and bears are frustrated — and will likely remain so until a breakout occurs.
Posted in Technical Analysis.
Tagged with Breadth, Breakout, Bullish Trend, Bulls And Bears, Caption, Larry Mcmillan, Market Commentary, Market Indicators, Oscillators, Ratios, Resistance, Signals, Spx, stocks, Technical Indicators, Vix, volatility.
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By – December 11, 2009