Blogs

Simultaneous $VIX “Spike Peak” Buy Signals (Preview)

By Lawrence G. McMillan

Early this week, a $VIX “spike peak” buy signal was issued when $VIX closed below 14.28 (more than 3.00 points from the intraday high of 17.28 set last Friday, August 11th).  The trading system that we have built around $VIX over the years calls for holding this position (i.e., being “long” the market) for 22 trading days, unless $VIX closes back above that intraday high (17.28, in this instance), in which case the position would be stopped out.  Over the years, this system has produced roughly 60% winners, with winning trades being about 1.5 times the size of losing trades.  Those are the statistics of a nicely profitable system.  

VXX to undergo another reverse split

By Lawrence G. McMillan

VXX will be reverse split 1-for-4, before trading begins on Wednesday, August 23rd.   It is a bit ironic that VXX is finally starting to rise so the reverse split might not be necessary, but this was probably in the “works” well before the recent announcement date.  

For existing VXX options, the striking price will remain the same, but the “shares per contract” will drop to 25 from 100.  Those existing VXX options will henceforth have the underlying symbol VXX2.■

Weekly Stock Market Commentary 8/18/2017

By Lawrence G. McMillan

$SPX has broken to new lows for this move, taking out the support at 2437. That means that a test of the 2400 level is likely in the cards. There is resistance at 2480.

Even with the relative negativity of recent movements, it is worth remembering that as long as support at 2400 holds, the $SPX chart will remain positive.

Equity-only put-call ratios have remained bearish since early August. After the buy signals from other indicators early this past week, these put-call ratios were our only remaining bearish indicators. So far, they have proven to be the most correct.

Weekly Stock Market Commentary 8/11/17

By Lawrence G. McMillan

The market averages have broken down and broken support (except for the Dow). This is the first time that can be said since this past March. We are looking at a strong possibility of a retest of the 2400 level. If that should fail, it is possible that a much more serious bearish market could develop. But as long as the 2400 support level holds, the $SPX chart will remain bullish.

The equity-only put-call ratios are both on sell signals. The WEIGHTED ratio (Figure 3) is a "cleaner" chart, and it just gave a sell signal at the close of trading on August 10th.

Weekly Stock Market Commentary 8/4/2017

By Lawrence G. McMillan

Certainly the $SPX chart is still bullish at this time, but once again $SPX is trapped in one of those tight ranges -- this time between 2460 and 2480. That range has essentially contained the action for the last twelve trading days. In the last nine months, since the election, those tight ranges have generally been resolved by an upside breakout. But until we have verification of that, it is wise to be prepared for a correction.

An Interesting Intermarket Spread (Preview) $DJX $DJT

By Lawrence G. McMillan

I’m not really big on Dow Theory because its signals seem to be rather nebulous.  Even the practitioners of the Theory cannot necessarily agree on when signals occur and when they don’t.  Supposedly Dow Theory says that “the Dow Jones Industrials ($DJX) and the Dow Jones Transports ($DJT) should confirm each other in major moves.   Trends persist until a clear reversal occurs.”  Well, try figuring out what a reversal is.  Is this one in Figure 8?  It’s the current chart of $DJX and $DJT overlaid with each other.  You can certainly see that $DJX is making new highs, while $DJT has stumbled badly.

The Seasonality of $VIX

By Lawrence G. McMillan

We have often talked about the seasonality of $VIX in past issues (although not for a while).  Figure 5 shows the Composite $VIX for a year.  A composite chart is constructed in a simple manner:

1) average the $VIX for the first trading day of the year and plot it

2) repeat the procedure for each successive trading day of the year

Obviously, in any one year, the composite chart may not accurately portray the entity being charted, but it can be useful to describe seasonal patterns.

Weekly Stock Market Commentary 7/28/17

By Lawrence G. McMillan

The $SPX chart is unabashedly bullish. It continues to make new highs, remaining above the trailing moving averages and holding above support. Thus the intermediate-term outlook is still bullish, per the $SPX chart (our most important indicator).

Equity-only put-call ratios remain bullish (Figures 2 and 3). The standard ratio has developed a little "wiggle" over the past few days, but at this point the computer analysis programs are still grading this chart as being on a buy signal.

$VIX Ties Record, With Six Consecutive Closes < 10 (Preview)

By Lawrence G. McMillan

This week, there has been some publicity about the fact that $VIX is (or has?) set the record for consecutive closes below 10.  However, both articles that I saw (one by Bloomberg, one by Ryan Dietrich) cited “backdated” data that – while representative – wasn’t actually correct.  The only other time in history where $VIX closed below 10 for multiple days in a row occurred in December 1993.

Weekly Stock Market Commentary 7/21/2017

By Lawrence G. McMillan

Bulls have been totally dominant again, over the past week (and really since last November). The gap upside breakout over the minor downtrend line (blue line in Figure 1), on July 12th, was once again the beginning of a strong upward move. This was similar to the previous upside breakout gap over a downtrend line, in late April. The $SPX chart is thus strongly bullish and will remain that way until support at 2400 is broken.

Trading or investing whether on margin or otherwise carries a high level of risk, and may not be suitable for all persons. Leverage can work against you as well as for you. Before deciding to trade or invest you should carefully consider your investment objectives, level of experience, and ability to tolerate risk. The possibility exists that you could sustain a loss of some or all of your initial investment or even more than your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and investing, and seek advice from an independent financial advisor if you have any doubts. Past performance is not necessarily indicative of future results.
Visit the Disclosure & Policies page for full website disclosures.