Futures traders and traders of cash-based options have a tax advantage: on every trade, no matter how long the position is held, the results are considered 60% long-term gain and 40% short-term gain. These are called Section 1256 trades.
This tax treatment grew out of the 1986 Tax Reform Act, and it represents a possible boon to traders who have profits in those areas (futures or cash-based options).
We continue to think that this rally has more room to run on the upside, but that it will eventually give way to the over-riding bear market trendline.
Near-term, there is support at 1970 and then at 1950 (the top of the "W"). It seems that the pullback to 1970 this week was about all that the bears are going to get in the short-term.
Equity-only put-call ratios continue to drop steadily, and that is bullish for stocks.
The market has exploded to the upside this week. Some overbought conditions are beginning to appear, but all the indicators are on buy signals right now.
The move above 1950 completed a "W" bottoming formation on the $SPX chart, very similar to the one that existed last October. It should now be able o advance to the downtrend line of this bear market.
Equity-only put-call ratios continue to be bullish. They are declining from lofty (oversold) levels and are solidly on buy signals.
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The bulls scored a major victory this week, by engineering a breakout and close above 1950 on Thursday. That completes the "W" bottoming formation. So for now, the near-term outlook is bullish.
Put-call ratios remain bullish. All three of the put-call ratios gave buy signals right at the February 11th bottom -- an excellent bit of timing, especially considering that these are 21-day moving averages.
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In the past week, the Standard & Poors 500 Index ($SPX) had a huge rally. Specifically, it rose by more than 1% for three consecutive days – for the first since October, 2011. On the surface, it seems that this is a powerful move that should inspire further gains. But I prefer to see hard facts, and so we ran the data on these types of moves.