Trade Naked » Bullish Trend

Everyone is Frustrated

Fri, 11 Dec 2009 18:29:08 +0000

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.

Strong Up Trend

Fri, 11 Sep 2009 17:39:00 +0000

Larry McMillan says:

SPX Through 9-11-09

The chart of $SPX is in Figure 1. The dominant factor is the intermediate-term rising trendline, connecting the March and July lows. That trend line is currently at 970, so any corrections that occur but hold above that point would just be corrections in a bullish trend. There is also support at 990 and 980 — the lows of the last two minor corrections. Meanwhile, $SPX broke out to new highs today, making both new closing and intraday highs.

Equity Only Weighted Put Call Ratio 9-11-09

The equity-only put-call ratios generated sell signals a couple of weeks ago, and have more or less clung to them ever since. Market breadth was quite negative for four days, during the last correction (which encompassed about 50 $SPX points, from high to low). But breadth has surged during the last week, and the breadth sell signals that existed have been canceled.

VIX Downtrend Through 9-11-09

The volatility indices ($VIX and $VXO) tried to reverse their downtrends during the last correction, but it was not to be. At this time, they have now both made new lows for this move, and that reaffirms the fact that they are in a downtrend. In turn, that is a bullish indicator for the stock market.

In summary, the fact that the $SPX chart is positive is the dominant feature of this market. Until that changes, there is no reason It would seem that the under-invested institutions will have to get sucked into the market before a meaningful correction can take place.

Still A Bull Market

Sat, 18 Apr 2009 01:25:49 +0000

This is from the Option Strategist by McMillan Analysis Corp.

“To put it simply, the broad market remains quite strong and continues to gather strength. $SPX has not once pulled back even to its 20-day moving average since it was first crossed in early March. $SPX has registered a consistent series of higher highs and higher lows, which is bullish, and the 20-day moving average is rising.

The $SPX chart exhibits resistance near the late January and early February tops in the 875-880 area. That may prove to be a stumbling block for the market in its current overbought state. Any pullbacks — if limited to the general neighborhood of the 20-day moving average — would be healthy and thus would not disturb the intermediate-term bullish trend. However, a decline below support at 780-790 would be significantly bearish. We don’t expect that in the near term, but it is a significant support level. The equity-only put-call ratios continue to decline rapidly, and that is bullish. But with the ratios so low on their charts, they are considered “overbought” as well.

Market breadth has been very positive pushing breadth deeply into overbought territory during most of the last two weeks. Volatility indices ($VIX and $VXO) have grudgingly, it seems, fallen to their lowest levels since last September. Even so, they remain in the mid-30’s — an area which previously had only been associated with extreme volatility. The trend of volatility is lower, and that is bullish.

In summary, the indicators are bullish. However, many of these indicators are overbought ($SPX far above its moving average, put-call ratios at the bottom of their charts, and market breadth oscillators above +500), so that a sharp, but short-lived correction is possible. However, as long as that correction doesn’t fall significantly below the 20-day moving average (say below 780), then the intermediate term trend is still bullish.”