Blogs

Weekly Stock Market Commentary 1/19/2018

By Lawrence G. McMillan

Stocks continue to advance at a rapid rate. Despite one half day of correction (down 40 points from high to low on Tuesday), $SPX has closed at new all-time highs on three of the last five days. There is now minor support at 2770 -- the low of the half-day correction that took place.

Equity-only put-call ratios continue to make new multi-year lows. The standard ratio hasn't been this low since the summer of 2014, and the weighted ratio hasn't been this low since the spring of 2010. For now, they are overbought but not yet on sell signals.

Don't Abandon Your Protection

By Lawrence G. McMillan

Last week, there was an article in the Wall Street Journal, saying that investors who have been buying protection are going to stop doing so, because of the losses incurred from buying the protection.  That line of thinking was thankfully countered in this week’s Striking Price column in Barron’s, where it was pointed out that many large investors want protection as insurance in case something unforeseen occurs.  I wrote an article yesterday for Moneyshow, and had this comment on the situation:

Weekly Stock Market Commentary 1/12/2018

By Lawrence G. McMillan

The chart of $SPX could not be more bullish. It is in a strong uptrend, well above all of its meaningful trailing moving averages, and continually making new all-time highs. Other indices are in similar shape, as far as making new all-time highs, but $SPX has the strongest chart of them all, going back to the election in November 2016. That's when this monster rally was launched, and it's still in full force.

There are now six unfilled gaps on the $SPX chart. I have marked them with horizontal purple lines on the chart in Figure 1.

CBOE Launches Volatility Product Microsite

By Lawrence G. McMillan

The CBOE has launched a microsite within the CBOE website that has information about all of the volatility-based Exchange Traded Products (ETPs).  The website is located at http://www.cboe.com/voletps.

VXX and XIV are two of the most liquid and popular ETPs (both are Exchange-Traded Notes), but there are many others.

There’s quite a bit of information on the site, so one can spend a while there attempting to absorb it all.  One useful section – especially for those not familiar with these ETPs is the FAQ (Frequently Asked Questions) section, where things like “roll cost” (the daily decay of long volatility products, like VXX) are explained.

The Post-Thanksgiving Seasonal Recap

By Lawrence G. McMillan

The post-Thanksgiving seasonally bullish period ended at the close of trading on January 3rd.  This period is a combination of three different seasonal patterns, which began at the close of trading on November 22nd (post-Thanksgiving, January effect, and Santa Claus rally). $SPX advanced 116 points, or 4.5% over that time period.  One component of our research indicates that it is usually best to be in the small-caps during this period.  However, this year the Russell 2000 ($RUT) only advanced 36 points, or 2.4%.  IWM advanced by 3.56 points, also 2.4%.  So this year it would have been better to be in $SPX all the way along, rather than in the Russell. 

Weekly Stock Market Commentary 1/5/2018

By Lawrence G. McMillan

The market blasted into the new year with a strong rally that has dominated the first three days of trading. The strength of this move is evident in the fact that on both January 3rd and 4th, $SPX gapped to new all-time highs. We have mentioned several times in the past how impressive this market has been with upside gaps to new highs over the past year. Thus, the $SPX chart remains bullish.

Equity-only put-call ratios had rolled over to sell signals almost two weeks ago. But now these averages are curling back down again. Technically, both ratios are still on sell signals, but those sell signals are certainly in jeopardy at this time.

Weekly Stock Market Commentary 12/29/17

By Lawrence G. McMillan

$SPX remains in a strong uptrend, with all averages rising on its chart. It is going to close out the year well above its rising 20-day moving average -- a moving average that it has touched only once in the last four months. You can't find an uptrend much better than that.

The equity-only put-call ratios had been in a more or less steady decline during this last month, as call buying has reached extremes. Now they have begun to rise from those multi-year lows, generating sell signals.

Weekly Stock Market Commentary 12/22/17

By Lawrence G. McMillan

The stock market euphorically gapped to new all-time highs on Monday, after the Tax Bill had been passed over the weekend. Pessimists might say that a gap to a new all-time high, on "the news," is a selling opportunity. They might be right, but it's really to soon to tell. One would have to see $SPX break some support areas before that could be confirmed. The bottom line is that the intermediate- term trend of $SPX is still up.

Equity-only put-call ratios have moved sharply lower over the past month or so, reflecting the ongoing bull market, which has been accompanied by heavy call buying. Hence they are overbought, but are NOT on sell signals at this time.

The Santa Claus Rally 2017 - 2018

By Lawrence G. McMillan

The idea of a seasonal pattern called The Santa Claus rally came from Yale Hirsch more than 50 years ago.  Simply stated, it says that the market generally rallies over the period including the last five trading days of one year and the first two trading days of the next year.  On average, the rally has been about a 1% move – nothing great, but certainly worth trading.  The seasonal period has just begun for this year: at the close of trading yesterday, Thursday, December 21st. 

Put Call Ratios at 7 Year Lows

By Lawrence G. McMillan

...Both the equity only and standard put-call ratios plunged to historic lows on Monday as the market gapped to new all-time hights and held on to the gains. 

Put buying was heavy enough on Tuesday and Wednesday that a small upward “curl” appeared on both of the equity-only put-call charts and the Total put-call ratio chart. This by itself is not meaningful, but if these ratios begin to trend higher, that would represent confirmed sell signals for the stock market...

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