The stock market, as measured by the Standard & Poors 500 Index ($SPX) continues to march upward at a dizzying pace. The market is overbought, and if $SPX violates support at 2060, we could finally see a correction.
Equity-only put-call ratios remain on buy signals. You can see from Figures 2 and 3 that the ratios are still trending downward. That is bullish.
Both of the breadth indicators remain on buy signals, and they are modestly in overbought territory.
With the stock market at all-time highs, and many stock holders sitting on large gains, thoughts often turn to options as a hedging technique. For stock owners, there are two ways to provide protection to a portfolio: 1) macro protection, which involves the use of index options to hedge a entire portfolio’s risk, or 2) micro protection, which involves the use of individual options on each stock in the portfolio.
The stock market advance is relentless. It has refused to correct for more than a day since bottoming over a month ago and over 230 points lower., but it is up another 12 points in overnight trading as I write this. The chart of $SPX is bullish because it remains in an uptrend.
Equity-only put-call ratios remain on buy signals, as they continue to drop sharply almost daily.
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The fall of the year sees more seasonal trading patterns than the rest of the year. Two more major seasonal trades are discussed in the feature article: the Heating Oil-Gasoline spread, and the Post-Thanksgiving Buy signal. Both have worked well often in the past, although not every year. Recommendations are made for both.
The fall of the year is ripe with seasonal patterns not only for stocks, but also for Heating Oil and Gasoline. Since we last published, we had a very successful trade from the October Bullish Seasonal pattern. Now we have to look forward to some others that are on the very near-term horizon. These are not the ones related to Christmas and the new year – those are often more vague and less profitable to trade.
It has been a great stock market rally, with $SPX advancing 200 points in about a month. But the advance is slowing, and sell signals are setting up (although none has actually been confirmed yet).
$SPX has minor support at 2030 and also below there, at 2000.
Equity-only put-call ratios have remained solidly on buy signals for nearly a month. They are dropping rapidly on their charts, and it's bullish for stocks as long as they continue to decline.
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The bears seemed to have the fight knocked out of them by the big rally from 1820 (on Oct 15th) to here. $SPX moved steadily higher yesterday, and closed at another new all-time high. Meanwhile, the upper 4-sigma “modified Bollinger Band” (mBB) continues to decline because of the decrease in volatility. It is now just below 2021, and with $SPX at 2038, you can see that it’s quite a ways above that Band – in overbought territory, if you will.