This issue contains our annual analysis of the trades we’ve made in the past in The Option Strategist Newsletter. 2011 was a very good year for hedged positions, but a poor one for speculation. We’ll delve into the various strategies, attempting to analyze (if possible) why each one performed the way it did.
Monday was a very boring market day (again), which did nothing to chance the technical situation at all. Breadth was actually fairly positive, so the breadth oscillators remain on buy signals, and the oscillators are modestly overbought. The equity-only put-call ratios remain strongly on buy signals as well. $VIX did rise a little, but not enough to change the fact that it is still in a downtrend, and that – coupled with the fact that the $VIX futures term structure is still positively sloped – is bullish.
The stock market finally was able to take advantage of the favorable seasonal pattern and break out to the upside. It is now imperative that $SPX take out the October highs at 1293. It would be bearish if $SPX closes back below 1260.
Equity-only put-call ratios remain on buy signals.
Market breadth (advances minus declines) has been acceptable but not strong. This is a potential problem, and is one of the few negative divergences.
MORRISTOWN, N.J. (MarketWatch) — The Standard & Poor’s 500 Index is hovering near 1,260 once again. What makes this significant is that this is the area not only of the 200-day moving average of the Index, but it is also the point where the index meets the downtrend line connecting the recent market tops.
The Standard and Poors 500 Index ($SPX) is hovering near 1260 once again. What makes this significant is that this is the area not only of the 200-day moving average of the index, but it is also the point where the index meets the downtrend line connecting the recent market tops. A close above 1270 would be a clear upside breakout.
Both the standard equity-only put-call ratio and the weighted ratio are on buy signals.
Despite positive seasonality, strong upside momentum, and buy signals among the various indicators, the market — as measured by Standard & Poor’s 500 Index — has basically repeated what happened before: it has failed at resistance posed by the 200-day moving average and by the downtrend lines connecting the recent tops over the past few months.
In this morning’s comment, I mentioned that the previous two times $SPX failed to break through the area of resistance in the 1260-1270 area, it turned down sharply. That’s what the bears are trying to duplicate today. I’m not sure they’ll be able to do it during this period of seasonal strength, but they are giving it a good go nonetheless.