Trade Naked » Uptrend Line

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.

S&P 500 Flat For The Week

Fri, 28 Aug 2009 18:01:42 +0000

From Larry McMillan today:

SPX through 8-28-09

Since we last published, $SPX has broken out to new highs once again. It has held the breakout level, trading more or less sideways this week. Overall, the intermediate-term indicators are generally bullish, with the possible — and important — exception of the equity-only put-call ratios.

Short-term, there is support at 1010 and at 980 below there. There is an uptrend line connecting the March and June lows, and that is the demarcation line for bull/bear arguments. As long as $SPX remains above there, the bulls are still in charge. That line is currently near $SPX 960.

Weighted Put Cal lRatio Through 8-28-09

The equity-only put-call ratios are beginning to waver. If they roll over to sell signals, that would be significant for these can be leading indicators.

Market breadth has been positive — extremely so. This is bullish for the intermediate-term because it signifies that the rally is broad. However, when stocks are this overbought, sharp but short-lived corrections are possible at any time.

VIX Down Trend Through 8-28-09

Volatility indices ($VIX and $VXO) remain subdued and thus they are still in downtrends. That is bullish for the stock market. $VIX slipped back below 25, and thus a new downtrend line can be drawn on its chart (Figure 4).

In the short term, as long as $SPX holds above 1010, the bulls are in charge. However, if $SPX slips below there — and certainly if it slips below 980 — and the equity-only put-call ratios have turned to sell signals by that time, then a bearish stance would be warranted.

Kissing 1000

Fri, 31 Jul 2009 19:18:15 +0000

Larry McMillan discusses the market this week. His overview on technical market indicators.

SPX Through 7-31-09

The breakout rally, started when $SPX broke out over 950 — and thus out of its trading range — continues to be strong. The $SPX chart is positive in that there is a clear uptrend line now, and the moving averages are rising (see Figure 1). Having said that, there are several indications that this market is severely overbought. One is that $SPX has now risen above its 3-standard deviation Bollinger Band something that rarely happens.

The equity-only put-call ratios remain on buy signals. The standard ratio had wavered a bit this week, but the computer program that we use to analyze these charts had resolutely stayed bullish, and now both ratios are making new relative lows again. These ratios are not overbought, as they are not that low on their charts. What is overbought, though, is market breadth.

Weighted Put-Call Ratio 7-31-09

Market breadth has been extremely strong, and is overbought at a result. Normally, strong breadth on a bullish breakout is a very positive thing, and that appears to be true again this time. The volatility indices ($VIX and $VXO) moved higher this week. It is quite unusual to see $VIX rise at the same time that $SPX is rising. In a broader sense, $VIX is still in a downtrend, and that is bullish for the broad market.

VIX 7-31-09

In summary, the market is bullish but overbought. We would expect a correction of 50 $SPX points or so to begin soon, to alleviate this overbought condition, thus paving the way for higher prices.