There are many ways that analysts have been disseminating statistics that show the current market environment is at historic levels, not only in terms of price, but in terms of the length of time it’s gone without corrections of various magnitudes.
The market is tired and overbought, but even so it managed to claw its was back yesterday afternoon, reducing the losses to mere fractions. As a result, the indicators closed in their previous bullish states. However, today there is some selling. Ostensibly this is because of a negative World Bank growth forecast. But in reality, plenty of people see the overbought condition and are looking for an excuse to sell. We would rather wait for actual sell signals.
If there were any doubts about the validity of the breakout to new all- time highs, they should be satisfied by now. $SPX has support at 1900, and then all the way down to 1860.
The equity-only put-call ratios remain on buy signals. The standard ratio had been lagging, but finally moved into the bullish column last week, joining the weighted ratio.
Market breadth was on the verge of sell signals this week, but they did not occur. So, both breadth oscillators remain on buy signals.
Do You Sell Naked Puts? If not, you may want to consider doing so. People often stay away from unocovered put writing because they hear that it is "too risky" or that it doesn't have a sufficient risk-reward. The truth is that put-selling, when secured by cash, is actually less risky than owning stock outright and can out-perform the broad market over time. The following article debunks myths surrounding put-writing and explains some of the benefits of this simple-yet-effective strategy.
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The broad market, as measured by the Standard & Poors 500 Index ($SPX) and other indices, has broken out to new all-time highs again. This time, the breakout quickly extended with a strong second day, and today added even more distance. This has turned the $SPX chart bullish.
This is the only issue to be published in May, and it is a “double issue.” The reason for this change in the publication schedule was an extensive travel schedule from April 30th through May 15th. While not technically twice the length, there are twice the number of articles.
One of the luxuries of publishing a “double issue” is that we can spread our range of topics out a bit. That’s what this article is about. It’s confirming and recounting some technical studies that have made their way around lately. They don’t necessarily have anything to do with the option market directly, but they certainly have to do with market direction and volatility. There are several technical studies presented in this article.
The stock market is proving to be frustrating to both bulls and bears. Despite chances for each, neither camp has been able to take control. The resistance level at 1900 for $SPX has thwarted the bulls, despite making marginal new all-time highs early last week. Conversely, the bears have had a couple of strong down days, but they have not been able to break $SPX down below support at 1860.
...Equity-only put-call ratios continue to remain split, with the standard on a sell, and the weighted on a buy. We plan to delve into why this is happening – in an article in this week’s Option Strategist newsletter – but the short answer is that traders are buying out-of-the-money, low-priced puts for protection.