By Lawrence G. McMillan

This past Monday, $SPX broke out to new all-time highs, smashing through the resistance area at 2440 in a strong manner. Then, just as abruptly, stocks have fallen since then, declining back into the previous 2415 2440 trading range. Both moves would ordinarily portend bigger moves, but in fact both were duds.

The support levels are still intact for $SPX, as is the 20-day moving average ($SPX hasn't closed below that simple MA for about a month). Support is in the 2415-2420 area, where several selling attempts failed in mid-June. Below that, the very important support area at 2400 is still intact as well. As long as those support levels are in place, the $SPX chart remains bullish.

By Lawrence G. McMillan

I thought it might be interesting to see how previous $VXO/$VIXMO sell signals have played out.  We have written plenty about this particular signal, which occurs very rarely – only when $VIX is near the 10 area, which is had been for a while now.  The actual signal is this: 

when $VXO closes below 10 and $VIXMO closes below 10.5,
that is a short-term sell signal for the stock market.  

Once the signal is given, $SPX usually declines sharply, almost immediately, but the decline is short-lived.

By Lawrence G. McMillan

It seems that no matter how strongly the market seems to sell off early in the day, it recovers almost all of those losses by the end of the day. As a result, the $SPX chart remains bullish. Subscribers know that we place a great deal of importance on the $SPX chart's trend, and as long as $SPX holds above support, the outlook for the overall market remains intermediate-term bullish.

Equity-only put-call ratios are probably our most negative indicator. Both ratios have been on the rise since early June and both are on confirmed sell signals -- confirmed by the naked eye as well as the computer analysis programs.

By Lawrence G. McMillan

A week ago, on Thursday, $SPX had broken out strongly to a new all-time high. It followed up with a modestly positive day the next day. On both days, "stocks only" cumulative breadth made new all-time highs as well, confirming the breakout.

However, since then, $SPX has traded in a very small and tight range for four consecutive days. A mere 15-point range has contained all four days' worth of trading. While this is annoying, it doesn't change the fact that the $SPX chart is bullish as long as $SPX continues to close above 2400.

Equity-only put-call ratios have curled slightly upward, but for now they remain bullish, albeit quite overbought.

By Lawrence G. McMillan

The market has roared to new all-time highs. This brute force market strength belies sell signals and a certain amount of general negativity in many of the other indicators. But it doesn't really seem to matter, as $SPX remains the strongest and, by definition, the most important indicator.

For the record, there is support at 2400 (this week's lows) and roughly 2350 (the lows of the big down day two weeks ago). An upside target of 2480 is in play, from the width of the previous trading range.

By Lawrence G. McMillan

We have repeatedly stated over the years that the S&P 500 index ($SPX) itself is the most important indicator, because even if all the other indicators are saying one thing, but $SPX is not confirming, then $SPX is right.

At the current time, $SPX is breaking out in a bullish manner, but the other indicators -- for the most part -- are not in agreement. Can $SPX carry the weight all by itself? Yes, because anything is possible, but that's not the ideal situation.

Equity-only put-call ratios are in an overbought state. The weighted ratio is at multi-year lows and on the cusp of a sell signal. The standard ratio is overbought, but not yet on a sell signal.

By Lawrence G. McMillan

Reference was made in Friday's Weekly Commentary to the fact that the weighted put-call ratio is at its lowest levels since November 2014.  The long-term weighted put-call ratio chart – dating back to 1998 – is shown in Figure 5.   In the 2002 bear market, the readings were astronomical, but since then, the ratio has ranged roughly from 50 to 130, except for some very bearish markets.  The lows have slowly crept higher over the years, which is understandable, as more people have come to rely on put buying as a routine “insurance policy.”  

By Lawrence G. McMillan

Stocks finally suffered a breakdown of sorts this week, after some extremely overbought conditions -- particularly in volatility -- had appeared. But the bulls are trying mightily to contain the damage, and they look they're doing it quickly.

At this point, $SPX remains within the trading range that was delineated by the March highs and lows (2322 - 2401). Very little damage has been done to the $SPX chart. It remains in a neutral state.

Equity-only put-call ratios remain at low levels on their chart, meaning they are in an overbought state. Actually, the weighted ratio (Figure 3) has begun to curl upward, and the computer analysis programs that we use are now saying this is a "sell."

By Lawrence G. McMillan

For some time, we have been waiting to see if $SPX can break out on the upside. A breakout has not occurred, despite marginal new all-time closing highs (by pennies) for $SPX.

In reality, $SPX remains trapped within not one, but two trading ranges. The first range is the larger one -- comprised essentially of the March highs and lows, 2322 to 2401. Within that range, there is an even tighter range at play: 2380 to 2400. Because of these trading ranges, the $SPX chart is neutral.