Weekly Commentary 5/11/12

By Lawrence G. McMillan

On Tuesday, May 1st, $SPX traded at 1415.  Now, just 7 trading days later, the entire psyche of the market has become dark and brooding.

$SPX broke down through support at 1390 last Friday.  But the crucial level is support at 1340, which has held so far.

Equity-only put-call ratios remain on sell signals.  This has been the most bearish indicator all throughout this decline.

Breadth oscillators rolled over to sell signals on May 3rd -- a week ago. Since then they have moved into oversold territory.

For the most part, the volatility indices ($VIX and $VXO) have been bouncing around in the ranges that they had established earlier this year.  For $VIX, that is the 17-21 range.

In summary, the selloff of the past seven trading days has taken a toll on the technical indicators.  The 1340 level on $SPX remains important, and a close below there would warrant a bearish stance.  But if that level somehow manages to hold, the bulls could once again strongly take charge.

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