By Lawrence G. McMillan

Once again, there are questions surrounding the settlement of the CBOE volatility derivatives on this past Wednesday morning (April 18th).  There was what could be manipulative action on the $VIX settlement.  The day before, $VIX had closed at 15.25, and on Wednesday morning S&P futures were trading slightly higher, so logically $VIX would have been little changed or even lower.  However, on the “a.m.” settlement process for the April $VIX futures, the settlement was at 17.26, up over two points from the previous night’s close and more than two points above where $VIX itself was trading at the time!!  

By Lawrence G. McMillan

In some ways, the market has recently shown a good deal of strength. But in other ways, it has to do more to overcome the intermediate-term bearish trend that still exists.

This week, $SPX finally broke upward out of the "box" that had been containing prices since March 26th (marked in red in Figure 1). However, the real test will come at 2750. If the rally can't break out above there, the $SPX chart will still be in a bearish downtrend.

Both equity-only put-call ratios are now on confirmed buy signals this week. The weighted signal is coming from a very oversold condition, but the same thing happened in early March, and the market tanked anyway.

By Lawrence G. McMillan

It may not seem like it, but $SPX has been in a wild trading range between 2585 and 2660 since March 23rd. Moreover, the range is constrained between two moving averages: the rising 200-day MA from below, and the declining 20-day MA from above. Hence, a breakout from this range should produce a strong initial move. The range is noted by a red box in Figure 1.

By Lawrence G. McMillan

Last week we published an article showing the different reactions of $VIX to the initial 6% drop in the stock market in early February, as compared to the 6% drop in the stock market in March.  In February, $VIX exploded from essentially 15 to 50.  In March, a similarly-sized move in the stock market only produced a rise in $VIX from about 15 to 25.  That’s a big difference.  For reference, those reactions are shown in Figures 5 and 6 – reprinted from the last issue.

By Lawrence G. McMillan

From a simple point of view, this market has once again bounced off of the still-rising 200-day moving average several times. If it were to close below there,then that would be very bearish, for a new leg of the downtrend would be in place. Until then, though, there is the possibility that the support in the 2580 area will hold, and further progress can be made on the upside.

Even so, the chart of $SPX will remain negative until the gap at 2750 is filled. That is a long ways from here and that gap may not be filled for quite some time.

By Lawrence G. McMillan

As far as the $SPX chart goes, the 200-day moving average (MA) has proven to be the rock that is holding the market together. It stalled the first decline back in early February, and now $SPX bounced off it four times in the last week, refusing to fall below each time. This creates a support area in the 2585-2590 range. But if that is broken, things could get ugly quickly.

By Lawrence G. McMillan

$SPX has not only violated support, but it has broken its modest uptrend line (red lines on the chart in Figure 1). It also has negated its pattern of higher lows (the two lows that, when connected, made that red trend line on the chart). So the chart is bearish. There are potential support lelves at 2620, 2580 (where the 200-day moving average is), and 2530 (the Feb lows).

At 2530 there is the possibility that bear-killing "W" bottom could form. However, if the 2530 level doesn't hold, then you're look at closing the gap from last September at 2460, and you'll also be looking at a potentially intermediate- to long-term bear market.

By Lawrence G. McMillan

An optimist would still see the bullishness in the $SPX chart, with the higher highs (mid-March vs. late February) and the higher lows. A pessimist would see failure to break out over 2790 this week as a major problem. So, one needs to watch resistance at 2790 and support at 2730 as significant levels.

The equity-only put-call ratios have remained solidly on buy signals.

As for the breadth oscillators, they just rolled over to sell signals as of last night's close (Thursday, March 15th). These oscillators have been fairly accurate of late.

By Lawrence G. McMillan

The $SPX chart has improved greatly. The 20-day moving average and the "modified Bollinger Bands" have curled upwards. That is a very positive development, for that aspect of the chart is no longer in a downtrend. Now it must overcome resistance at 2790.

A major intermediate-term bullish development is that the equity- only put-call ratios have rolled over to buy signals. This happened in just the last two or three days, so these are fresh signals.

Market breadth has improved over the past week, and both breadth oscillators have risen into modestly overbought territory. That places them on buy signals, canceling out any previous sell signals.

By Lawrence G. McMillan

The first thing to note is that the $SPX chart is still negative. The chart in Figure 1 clearly has downtrending moving averages and Bollinger Bands. Those are dominating the action right now.

The equity-only put-call ratio charts remain on sell signals. The ratios are racing higher now -- especially the weighted ratio. It is at levels last seen in November, 2016, just after the election. As such, it is an oversold state.

Market breadth has been accurate in tracking the market's moves. The breadth oscillators are technically on sell signals right now, although they are near the center of their historic range.