Weekly Stock Market Commentary 9/29/17

By Lawrence G. McMillan

Finally, there has been some follow-through movement to the upside. $SPX has made new all-time closing and intraday highs on the last two days. This keeps the $SPX chart bullish, of course. There is still the strong support at 2480 (the level from which the last major breakout occurred), and now there is also support at 2488 -- last week's lows.

The equity-only put-call ratios have slowly been working their way lower on the charts. That means they are still on buy signals. Call buying has remained fairly strong over the past two weeks, even though $SPX has been moving sideways.

This is Why One Uses Trailing Stops

By Lawrence G. McMillan

Intercept Pharm (ICPT) was crushed on Thursday, falling 24 points after the FDA issued a warning on an ICPT liver drug. The stock had previously been in a negative technical pattern, having recently broken down below multiple support at 104. It had tried to rally back, but couldn’t overcome resistance. Stock volume patterns are terrible. There is resistance at 86-90.

Weekly Stock Market Commentary 9/22/17

By Lawrence G. McMillan

$SPX had made either new intraday all-time highs or closing all- time highs for eight consecutive trading days until yesterday, September 21st, when it did not. The chart remains bullish, with major support at 2480.

Equity-only put-call ratios remain on buy signals. There is a slight wiggle in the standard chart (Figure 2) but the computer analysis laughs that off. Both of these ratios are declining rapidly, as call buying has been dominant since the September 11th breakout by $SPX.

Another Series of $VXO/$VIXMO Sell Signals (Preview)

By Lawrence G. McMillan

For a long time, from 2006 to 2017 (with the exception of a lone sell signal in 2014), this system didn’t generate any signals as $VIX traded at normal levels of 15 and above.  But when $VIX dropped to extremely low levels this year, these sell signals began to appear again.  We had previously written about this system in issues dated Jan 27th and July 16th.  Simply stated, the system is this:

“IF $VXO closes below 10, and $VIXMO closes below 10.50, Sell the broad market.”

September Expiration: Bearish for the Next Week (Preview)

By Lawrence G. McMillan

One system that we normally trade is the one that says the market declines the week after September expiration.  This definition of “expiration” goes back to the days before weekly options, so it refers to the third Friday of the month (today, September 15th).  Last year, this system did not work, but it has produced profits in 22 of the last 27 years.  The track record is shown below.  Note that a negative number is “win” (i.e., the market went down) while a positive number is a “loss.”

Weekly Stock Market Commentary 9/15/17

By Lawrence G. McMillan

On Monday, September 11th (a date we will never forget), $SPX broke out to new all-time highs. There hasn't been a lot of follow-through after that, but those highs have been retained.

The importance of these new highs is that they distinctly turn the charts positive. The $SPX chart now has support at 2480 (the old highs), as well as at 2460 and every 20 points down, all the way to 2400.

This most recent upside breakout has generated a lot of call buying in the past week. As a result, all of the put-call ratios are dropping sharply, which is bullish. Both equity-only put-call ratios are on strong buy signals now (Figures 2 & 3).

Will The Short Volatility Trade Ever Disappear? Part II (XIV)

By Lawrence G. McMillan

This week, we came upon an article entitled “Could some $VIX-related funds go “poof” in a day?”  Obviously they can, as we pointed out last week.  But rather than warning of the dangers of this, the author was yet another volatility seller, who bemoaned: “Two funds designed to short the volatility index [meaning XIV and SVXY] could be wiped out if the index goes up.

Weekly Stock Market Commentary 9/8/17

By Lawrence G. McMillan

Late last week, $SPX broke out above a minor downtrend line, accompanied by buy signals from several indicators. It appeared that a move to new all-time highs was imminent.

However, those plans have stalled. $SPX did challenge the previous highs at 2480 but was unable to break through. This week it has struggled. So, at this time, the $SPX chart needs to break out over 2480 to be classified as strongly bullish. Otherwise it's in a trading range, from roughly 2400 to 2480.

The equity-only put-call ratios have diverged. The standard ratio is on a buy signal, but the weighted ratio stubbornly clings to a sell signal.

Will The Short Volatility Trade Ever Disappear? (XIV)

By Lawrence G. McMillan

We have written many times about the “Big (Volatility) Short.”  It is a very profitable trade, for the most part.  It comes about because of the upward-sloping term structure of the $VIX futures during a “normal,” bullish market.  In its simplest, original form, one merely shorts the $VIX futures a month or two out in time and sits back, waiting for the passage of time to bring the futures prices down to meet $VIX at expiration.  In effect, the “time decay” of the premium in the $VIX futures produces a profit for the short sellers of $VIX futures.

Weekly Stock Market Commentary 9/1/2017

By Lawrence G. McMillan

$SPX has staged a rally that began on Tuesday's opening (August 29th) and has lasted three full days to date. The result was a breakout through the downtrend line that had been in place (see Figure 1), and that has turned the $SPX chart bullish.

On the downside, the first support level is 2440. Tuesday's rally has also left 2428 as a support area, to go along with 2420, and then the major support area at 2400. A close below 2440 be a enough to negate the current upside breakout, in my opinion.

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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