Bears are having trouble understanding why the stock market continues to rise, but in reality it’s due in part to the fact that there are still too many bears. Many of the people who would be sellers have already sold and are now sitting back waiting for the market to go down. That strategy rarely works.
The fifth edition of the best-selling book, Options As A Strategic Investment was released today, August 7th. An updated version of the Study Guide has also been released. The first edition was released in late 1979 with a 1980 copyright. Further editions followed in 1986, 1993, and 2002. Hence, it has been ten years since the last update.
Almost like clockwork, the pendulum of this market swings back and forth within the bullish trading range that $SPX occupies. As long as $SPX stays within this range, the overall picture is bullish.
However, this time around, we are starting to see some more deterioration in some other technical indicators. In particular, the equity-only put-call ratios are beginning to seriously weaken. Moreover breadth indicators are on sell signals.
MORRISTOWN, N.J. (MarketWatch) — Since the broad stock market, as measured by the Standard & Poor’s 500 Index, bottomed in early June, the ensuing rise has been met with doubt, skepticism, and even outright derision (dare we say “hate?”) in some cases.
This week's selling drove $SPX down to the lower end of its bullish trading channel (see Figure 1). The selling managed to dissipate right near the lower channel, and so the bullish pattern is maintained.
Equity-only put-call ratios have remained bullish throughout this recent decline, just as they have generally remained bullish since generating intermediate-term buy signals right near the June stock market lows.
Market breadth wavered early in the week, but are back on buy signals now.
The recent sharp, 3-day decline in stocks produced very divergent readings in the breadth oscillators that we follow. Such divergences are rare – occurring about twice per year. When they do occur, though, they are generally a good buy signal for both the short- and intermediate-term.
Fear was strong in the market yesterday, as selling ballooned by early afternoon. The losses were larger and increasing when a rumor started that the Fed is close to taking more action. That news reversed the market upward, cutting some of the losses about in half. But then, after the close, Apple (APPL) reported a slight earnings miss, and S&P futures plunged another 7 points in after-hours trading.
MORRISTOWN, N.J. (MarketWatch) — As you may be aware, we’ve been bullish on the broad stock market since shortly after the early June lows.
$SPX exceeded its early July highs today. That is a new high for this recovery rally that began in early June. As a result, the classic bullish pattern of higher highs and higher lows on $SPX has expanded and been strengthened by adding this new high (see Figure 1).
Equity-only put-call ratios remain strongly on buy signals. They continue to decline, and that is bullish for stocks.
Market breadth has been reasonably strong of late. Breath indicators are on buy signals, and they are modestly overbought.
The Standard &Poor’s 500 Index traded right up to its recent highs today, continuing the rally that began in early June. However, for the most part, the rally has been accompanied by doubt from many areas of the investing community. As a result, by contrarian thinking, this market should have more room to go on the upside.