Larry McMillan still sees the S&P 500 in its trading range with the greater likelihood of a further drop.
SPX Through 10 July 2009
Put Call Ratio 10 July 2009 with OEX
The equity-only put-call ratios continue to rise and are thus still on sell signals. Since they started from such a low point on their charts, they have a long way to roam on the upside before we would consider them “oversold.”
Weighted Put Call Ratio with OEX
Market breadth turned decidedly negative in the last week, as the market sold off, but have now reached oversold status. However, “oversold” does not mean “buy.” So until these generate true buy signals — which they would do with one more day of advances leading declines — we consider them as still being on sell signals.
VIX with Trend Line 7-10-09
Volatility indices moved higher this week. Once again, $VIX has broken up through the downtrend line that has defined its intermediate- term decline since the March $SPX lows. If $VIX truly does break out on the upside, that would be negative for the stock market. A close below 29 would return $VIX to a bullish indicator.
In summary, the bulls may attempt a rally here, but we would not expect it to be particularly robust — probably just enough to work off the oversold condition in the breadth oscillators. Thereafter, unless the indicators quickly change, we expect a downside breakout to occur.
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