Blogs

Weekly Stock Market Commentary 3/3/17

By Lawrence G. McMillan

Overall, stocks had another very strong week, although there was certainly some hesitation yesterday. Even so, the trend remains upward for now. $SPX has moved steadily higher in a stair-step fashion all during the month of February. As a result, there are several support levels of interest. The highest is that in the 2350 - 2370 range, and below that is more important support at 2300.

Equity-only put-call ratios continue to bump along at the lowest levels of their charts, as call buying has been quite dominant. So they are in an overbought state, and it would not be hard to roll them over to sell signals if put buying begins to increase.

$VIX Options Set To Begin (15:02)

By Lawrence G. McMillan

This article was originally published in The Option Strategist Newsletter Volume 15, No. 2 on January 26, 2006.

After a lengthy delay, the CBOE has announced that $VIX futures will begin trading on Friday, February 24th. We first wrote about these options last March (2005) when it seemed imminent that they would begin trading. However, there was a delay – a delay which is about over. In this article, we’ll lay out the specifications of the contracts once again, and refresh your memories on a few important points about how the contracts might trade.

First and foremost, it should be understood that these are options on the cash $VIX, much as there are options on $SPX or $OEX. These are not options on any of the Volatility or Variance futures. As a cashbased index option, they can be traded in a regular stock option account, with your favorite brokerage firm, just as index options can.

Weekly Stock Market Commentary 2/24/17

By Lawrence G. McMillan

Stocks have continued to move higher across all of the major averages. As might be expected after an advance of this magnitude and length, overbought conditions continue to abound.

One of the foremost things to consider, though, is that the chart of $SPX remains bullish. It continues to trend higher, with all moving averages in sync. The first major support area is at 2300.

Both equity-only put-call ratios continue to decline and thus remain on buy signals.

The Option Strategist Newsletter: 2016 Performance Review

By Lawrence G. McMillan

The past year was another good year for the performance of The Option Strategist Newsletter (TOS).  For the year, overall, TOS performance was a gain of 34.6%.  The largest area of profit were the futures put ratio spreads, followed by a superior performance from the put-call ratio recommendations.  SPY put ratio spreads also performed well, as did event-driven straddle buys.  The worst area of performance was the DSI-based recommendations (more about that later).

Weekly Stock Market Commentary 2/17/17

By Lawrence G. McMillan

Exactly a week ago, on February 9th, $SPX broke out over 2300, establishing new all-time highs, accompanied by almost all of the major averages, including finally the small-cap Russell 2000 ($RUT). The chart of $SPX remains bullish as long as $SPX is above 2300.

Both equity-only put-call ratios have turned sharply lower in the past week, as the upside breakout has been accompanied by heavy call buying. Thus they remain on buy signals.

Overall, breadth has been positive so the breadth oscillators remain on buy signals.

$VIX is overbought, too, in that it is at very low levels. But even so, $VIX remains in a bullish state for stocks as long as it is below 15.

Weekly Stock Market Commentary 2/10/17

By Lawrence G. McMillan

The stock market, as measured by most of the major indices, made a breakout move to the upside yesterday and is now trading at new all-time highs once again. $SPX is clearly in an uptrend and holding above all support areas, which is bullish.

Equity-only put-call ratios continue to crawl along the bottom of their charts, moving mostly sideways rather than up or down. This is another overbought indicator, but it won't really become bearish until these ratios begin to trend higher.

Market breadth has been struggling somewhat as it has not kept pace with the strength of the broad market. But the breadth oscillators are on buy signals, nonetheless.

Years Ending in “7"

By Lawrence G. McMillan

Long-term cycle charts are interesting to look at, but I’m not sure how much they help one’s trading or strategy.  In any case, there is a website, www.seasonalcharts.com that has such charts, and one that can be quite interesting is the 10-year cycle chart of the Dow.  In other words, the data for the Dow is accumulated by year and then published in a way that you can see the pattern of each year of the decade – going back to 1897 in this case.

Weekly Stock Market Commentary 2/3/17

By Lawrence G. McMillan

The broad stock market has gone into a very tight range over the last four trading days. After what had appeared to be a promising upside breakout on a gap a week ago Wednesday, there was no follow-through on the upside. Meanwhile, there has been no follow-through on the downside either. The $SPX chart remains bullish from a trending viewpoint.

Equity-only put-call ratios continue to plow along at very low levels, meaning they are in overbought territory. But they are rather noncommital until they begin to rise out of this area and trend solidly higher.

Island Reversal: A Warning Sign on the $SPX Chart

By Lawrence G. McMillan

Yesterday was not a good day for stocks, but considering how far the rally has come in the last few months, it wasn’t too surprising to see a setback of sorts.  However, the selling generated some sell signals and it has left a warning sign on the $SPX chart – an island reversal.  One does not often see islands on the averages because the electronic computation of the Index begins as soon as any stock in the index opens.  If there is a gap on the $SPX chart, it essentially means that nearly all of the stocks are opening on gaps.  In any case, an island reversal of this sort is a big negative.

Is $VIX “Too Low” (Preview)

By Lawrence G. McMillan

As a general rule, I am not in favor of shorting the market when $VIX is “too low.”  That is usually a loser’s game, as the market doesn’t turn downward until $VIX begins to trend upward.  However, there is a combination of factors that we researched a long time ago (at least 10 years) that is now coming up again.

Background

$VIX was invented by Professor Whaley for the CBOE and first published in 1993.  That version of $VIX used only 4 series of $OEX options.  It used the two front month options, and the two nearest strikes that surrounded $OEX’s price.  It was backdated to 1986 so that the Crash of ‘87 could be in the data.

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