Blogs

Shortened Sessions Can Bring Volatility (SPX)

By Lawrence G. McMillan

Today is a half-day, holiday-shortened session, and Friday will likely be a very low-volume affair.  However, that doesn’t mean that prices can’t be volatile.  In the bear market of 2002, the bulls engineered a 300-point Dow rally out of nowhere on July 5th, only to see the bears wipe it out completely in a few days after that.  But if you have positions, these big moves can be meaningful.

The Option Strategist Newsletter (Volume 22, No. 12) Preview

By Lawrence G. McMillan

With the market having broken down in the past two weeks, this issue has a lot to do with volatility.  The feature article discusses bullish setups via volatility spike peak buy signals in four different markets.  Recommendations are made in GLD, EEM, and AGN.

Weekly Stock Market Commentary 6/28/13

By Lawrence G. McMillan

The speed with which $SPX fell -- 63 points in two days -- meant that it sliced right through support areas without stopping. There is support at 1560 -- this week's low on $SPX.  Furthermore, there is important support below there, at 1540, from a series of lows back in March and April.

Equity-only put-call ratios have not given confirmed buy signals yet.  They remain on sell signals.

Volatility Spikes - $VIX $GVZ $VXEEM

By Lawrence G. McMillan

With the stock market collapsing recently, option implied  volatility spiked higher in a large number of markets.  Of course, actual (historical) volatility has increased as well, but it is implied volatility that reflects more of the panic mood of the public, and thus is the one that can be used as a contrary indicator.

Use Futures Options to Hedge Limit Moves

By Lawrence G. McMillan

All futures contracts are limited in the amount by which their price can change in any one day. The exchange where the future is traded determines the size of that daily limit. The greatest fear that any futures trader has is that he will get caught on the wrong side of a prolonged limit move and therefore not be able to get out of his position. If this happens, huge losses could occur.

Awaiting a "Spike-Peak Buy Signal"

By Lawrence G. McMillan

(Barron's) - Options can be great contrary indicators.

Puts and calls are very versatile. Strategically, they can be used for leveraged speculation by some, while providing protection, income, or both, to others. Their prices and volume also can produce information advantageous for an investor or trader, even if that person doesn't actually buy or sell options.

Weekly Stock Market Commentary 6/21/13

By Lawrence G. McMillan

The initial selling on Wednesday afternoon was probably just some profit-taking by traders who'd bought heavily on Monday and Tuesday. But then the selling gathered momentum.

Outlook extremely negative below $SPX 1600

By Lawrence G. McMillan

After the FOMC meeting announcement Wednesday, the stock market fell sharply.  All those people who had bought earlier – on Monday and Tuesday – had apparently become profit-takers by late Wednesday.  Even though $SPX probed slightly above 1650 in the last two days, this was not an upside breakout.  In fact, it just pushed the upper resistance area slightly higher, but $SPX still remains within the general 1600-1650 trading range.

Weekly Stock Market Commentary 6/14/13

By Lawrence G. McMillan

The stock market has found itself under increasing pressure again this week, and once again seems to have found support at 1600. It is also clear that 1650 is resistance and $SPX is trading wildly and with great volatility in between those two levels.

Equity-only put-call ratios have remained solidly on sell signals throughout.  Even on days when the market has rallied, there has been considerable put buying.

Market breadth indicators are currently mixed.

The Option Strategist Newsletter (Volume 22, No. 11) Preview

By Lawrence G. McMillan

The feature article discusses the fact that stocks, bonds, and the U.S. Dollar have all been declining together.  A hedged position is recommended in Bonds vs. the Dollar.

The $VIX spike peak buy signal was stopped out, but another may be setting up (page 4).

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.
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