Weekly Stock Market Commentary 12/20/13

By Lawrence G. McMillan

Even with the volatiilty following the FOMC meeting, SPX still has not broken out of the 1775-1812 range on a closing basis.  If it DOES break out to the upside, the positive year-end seasonality should help.

The equity-only put-call ratios moved to sell signals about a week ago, but those signals are now wavering.

Market breadth gave buy signals earlier this week, but now those two breadth indicators are mixed: one on a buy; the other on a sell.

Volatility indices ($VIX and $VXO) plunged in the wake of the Fed's action.  Of course, they had been somewhat artificially elevated prior to it.  $VIX is bullish at the current levels (below 15).

In summary, the bears are trying to "defend" the 1810 level, but if there is an upside breakout, it will likely have some follow-through, at least in part due to the positive seasonality that lasts through the second trading day of the new year.

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