Blogs

XIV: The Scapegoat of The Market’s Decline

By Lawrence G. McMillan

As trading opened on Monday, February 5th, 2018, stocks had already been falling for a few days.  Then on that day there was a major decline – the largest drop in point terms in history.  The Dow was down 1,175 points. The S&P 500 Index ($SPX) was down 113 points.  All other major stock indices suffered similar fates.  Those net changes were effective as of the 4 p.m. (Eastern time) close of the NYSE.  

Weekly Stock Market Commentary 2/23/18

By Lawrence G. McMillan

At least one cannot say the market is boring, as might have been said a month ago. The daily ranges are still large, with both buy and sell programs springing up out of nowhere. The battle between the bulls and the bears seems to have settled in now, and there is a real question whether or not the rally can continue or whether it will have to retest the lows.

First, consider the $SPX chart (Figure 1). It is still in a bearish state. At this point, $SPX has developed a resistance area roughly in the 2750 range. If it can close above there, that would be a bullish development. Conversely, continued failures to close above there make the probabilities of a retest of the lows more likely.

This market is not out of the woods yet

By Lawrence G. McMillan

Prices were all over the map on Friday, as traders tried to lessen their risk heading into a long 3-day weekend.  In the end, $SPX was little changed.  Over the weekend, there have been two night sessions in the S&P futures, without benefit of NYSE trading.  On Sunday night, the futures opened higher and rose about 14 points.  From there, they fell the rest of that session and then fell again last night, dropping 38 points from those highs.  They have recovered a bit now, and stand at about –15 from Friday’s close.  

Weekly Stock Market Commentary 2/16/2018

By Lawrence G. McMillan

First and foremost, the $SPX chart still has a bearish look to it. This oversold rally has been very strong; there's no doubt about that. But oversold rallies often die out at about the declining 20-day moving average, or maybe just a little above that. This rally has just reached that level.

Equity-only put-call ratios have exploded off their multi-year lows and are racing higher at a quick pace. The weighted ratio has reached multi-year highs and is oversold. Despite that, both of these ratios will remain on sell signals until they roll over and begin to trend downward.

Market breadth has been strongly positive this week, and both breadth oscillators finally rolled over to buy signals.

What Just Happened In The Volatility ETPs? (Preview) XIV VXX

By Lawrence G. McMillan

XIV: The Scapegoat of The Market’s Decline

As trading opened on Monday, February 5th, 2018, stocks had already been falling for a few days.  Then on that day there was a major decline – the largest drop in point terms in history.  The Dow was down 1,175 points. The S&P 500 Index ($SPX) was down 113 points.  All other major stock indices suffered similar fates.  Those net changes were effective as of the 4 p.m. (Eastern time) close of the NYSE.  

Weekly Stock Market Commentary 2/9/18

By Lawrence G. McMillan

In just nine trading days, $SPX is down 9.0% and has lost 291 points. That's a lot of distance in a short time. This decline has rolled nearly every intermediate term indicator into a bearish status, if it wasn't there already. It has also caused some massive oversold conditions to appear. But remember, "Oversold does not mean buy," and that is lesson that is harshly taught every time the market sells off like this.

Weekly Stock Market Commentary 2/3/17

By Lawrence G. McMillan

Stocks sold off sharply this week -- the first decline of any note since early last December. This one may have some sticking power, though, as rally attempts failed all week, and then when support was broken on Friday morning, a rout was on.

I am fairly certain that support at 2680-2700 will prove to be useful, but there isn't much support above that. The $SPX chart will remain positive unless the 20-day moving average rolls over and begins to decline. As you can see in Figure 1, it is still rising with a small slope.

A Rare, But Often Effective, Early Warning Sell Signal (Preview)

By Lawrence G. McMillan

This is something that we’ve written about twice before – first in 2011 (Volume 20, No. 16) and later in 2013 (Volume 22, No. 15).  In short, one measures the advance in the $SPX Index over a 494-day span (trading days).  If it has risen 50% or more over that time, it is a major overbought warning.  However, to use it effectively as a timing tool is difficult, for the market can continue to advance (five times since 1950, the advance has reached 70% in that time period – of which four were relatively major tops).  Moreover, there can be long periods of time (weeks or maybe even a couple of months) where the measure flits above 50%, then below, then above, etc.

Weekly Stock Market Commentary 1/26/2018

By Lawrence G. McMillan

The superlatives that are being used to describe this market are well-deserved. $SPX has advanced so fast that there really isn't any support, unless you want to declare the low of the "half-day" correction at 2825 a minor support area. The one clearly defined support area is the 2680-2700 area that was formed in late December and from which this January rally was launched.

Call buyers are making money in this market, and they are piling in with a vengeance now. The equity-only put-call ratios are dropping even more rapidly than they previously were. That makes them overbought, but they are on buy signals.

Barclays’ Announces Launch of new ETNs: VXXB and VXZB

By Lawrence G. McMillan

Before you get too excited about a new volatility product, let me explain that the two new ETN’s – short-term volatility (VXXB) and intermediate-term volatility (VXZB) are merely the eventual replacements for VXX and VXZ. The latter two (VXX and VXZ) have a maturity date of January 30, 2019 – ten years after they were introduced. These two new issues will replace them. So, for now, the new issues are trading with a “B” at the end of their symbol. When VXX and VXZ mature in about one year, these two new ones will remove the “B” from their symbol and will trade as usual.

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