Weekly Stock Market Commentary 2/3/17

By Lawrence G. McMillan

The broad stock market has gone into a very tight range over the last four trading days. After what had appeared to be a promising upside breakout on a gap a week ago Wednesday, there was no follow-through on the upside. Meanwhile, there has been no follow-through on the downside either. The $SPX chart remains bullish from a trending viewpoint.

Equity-only put-call ratios continue to plow along at very low levels, meaning they are in overbought territory. But they are rather noncommital until they begin to rise out of this area and trend solidly higher.

Market breadth hasn't been bad, but it hasn't been good, either -- and that's something of a problem. Both breadth oscillators are on sell signals at this time, but they are muddling along at levels where one strong day of positive breadth would easily cancel out those sell signals.

Volatility has been the most bullish indicator of all the ones that we follow. It has not had the problems of any of the above indicators. It has remained low and as long as that is the case, stocks can rise. $VIX only becomes a problem if it begins to trend higher.

For now, the intermediate-term outlook remains bullish because $SPX is above support and $VIX is below resistance.

This Market Commentary is an abbreviated version of the commentary featured in The Option Strategist Newsletter.

The Option Strategist Newsletter $29 trial

Share this

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.