MORRISTOWN, N.J. (MarketWatch) — Despite the occasional overbought condition, the stock market – as measured by the Standard & Poors 500 Index — continues to plow higher. Considering that support levels keep building up below the market, and that overbought conditions rotate out without any major damage to the bullish market, it is clear that the bulls are still in charge.
Yesterday seemed to be a typical “Turnaround Tuesday” – an opposite reaction to a strong market move on Monday. In the past, this was a common occurrence, but so far this year there hasn’t been much of anything that would cause the market to decline. So perhaps we are returning to a bit more of a normal, and perhaps more volatile, market. $SPX made a new post-2008 intraday high before closing lower. There is support near 1410, and then stronger support at 1385-1390.
The market is taking a small breather today after yesterday’s strong bullish move. There doesn’t seem to be anything that would indicate this is more than a normal pause. There is now viable support in the 1385-1390 range for $SPX, which was last week’s low. Furthermore, the 20-day moving average is rising rapidly and is near that level as well.
The stock market, as measured by $SPX, continued to advance in a narrow low-volatility manner. There is solid support at 1375-1380.
Equity-only put-call ratios continue to trade sideways, in a very back-and-forth manner. As long as they are in this state (and you can see the charts in Figure 2 and 3), we are considering this indicator as being "neutral."
We have been writing commentary for months now, detailing the steepness of the $VIX futures term structure. But recently, it has risen to levels never seen before in the listed VIX futures markets (volatility derivatives began trading in 2004). In this article, we’ll look at the current situation, compare it to past extremes, discuss appropriate strategies, and see if there is any predictive value to these extremes.
The bulls aren’t going to find a much better market than this one. Overbought conditions are worked off with minimal — almost “stealth” — corrections. Volatility remains low, while prices continue to rise. Support levels continue to build up along the way. And public opinion remains skeptical or even bearish in certain areas.
In our daily letters and in last week’s hotline, we have written extensively about the “levitating act” that the stock market was performing. Essentially, it had gone from late December through this past Tuesday, while hovering above a number of standard indicators.
The stock market decisively broke out to the upside on Tuesday, thereby confirming (in my opinion) that the volatile move we have been talking about would take place on the upside.
The equity-only put-call ratios are wavering around at more or less constant levels and aren't giving any clear signal right now. Market breadth hasn't been particularly great over the past three weeks, although it did revive enough this week to push the breadth indicators back onto buy signals.
(Marketwatch) - Just a week ago, the market had its worst day of the year. The Standard & Poor’s 500 Index finally touched and even closed below its 20-day moving average, for the first time in 52 trading days.
The gaps between historical volatility and implied volatility have never been larger. Furthermore, the gaps between $VIX and the intermediate-to-long-term futures have rarely been larger, as well. Trading desks around the street are aware of these facts and those with “volatility desks” are writing about the situation or making recommendations because of it. The one thing that no one seems to be addressing, though, is why the term structure of the futures is so steep and remains that way.