1080 is Critical

Fri, 20 Nov 2009 18:15:16 +0000

Larry McMillan’s weekly market commentary:

SPX Through 11-20-09

The positive news was that $SPX broke out over 1100 last Monday, convincingly moving well above that resistance level, and doing so with strong volume (a 90% up volume day). The negative news is that the breakout is in jeopardy of becoming a false one. Near-term support exists at 1080-1085.

From an intermediate-term point of view, the $SPX chart remains bullish because the uptrend line connecting the major lows is intact and still rising. Furthermore, the series of higher lows is still intact.

Market breadth has given another sell signal — the third one since November 10th. These repeated sell signals are a sign of the deterioration in the overall market. These sorts of things can persist as tops are “rounding” affairs.

The equity-only put-call ratios have still not completely shaken off the effects of the massive put hedging purchases that have taken place since July, 2009. These ratios have remained in very tight ranges over the past couple of months.

VIX Through 11-20-09

Volatility indices, however, are still quite low. Thus, the trend of volatiltiy remains downward and that is bullish. Even with today’s rather sharp selloff, $VIX was only slightly higher.

In summary, the $SPX chart is intermediate-term bullish as are the volatility indicators, but a close below 1080 would be short-term negative — likely signaling the next correction, as confirmed by the sell signals in the breadth oscillators.

Trade Naked » Selloff

1080 is Critical