Weekly Stock Market Commentary 3/24/17

By Lawrence G. McMillan

The stock market has finally broken a support level, in terms of the Standard & Poors 500 Index ($SPX). When $SPX traded below 2350 on Tuesday, it led to a fairly severe down day. This turns the short-term picture negative. The next support level is at 2300.

Equity-only put-call ratios are quite bearish. They will remain bearish as long as they continue to trend higher.

Currently, both breadth oscillators are on buy signals. It is somewhat ironic that breadth was a laggard when the market was on its way up, but now seems to be stronger than the market on the way down.

Weekly Stock Market Commentary 3/17/2017

By Lawrence G. McMillan

The stock market, as measured by the Standard & Poors 500 Index ($SPX) rather quietly bottomed a week ago and has moved steadily higher over the ensuing week. Thus, the $SPX chart remains bullish with support at 2350 level.

Equity-only put-call ratios continue to creep higher. This has had the effect of generating sell signals, at least according to the computer programs that we use to analyze these charts. In reality, these charts won't be truly bearish until the put-call rises sharply and steadily from here.

Weekly Stock Market Commentary 3/10/17

By Lawrence G. McMillan

Things are beginning to deteriorate, somewhat in terms of price, but mostly in terms of our indicators. We've seen this scenario before, though -- most recently in late December, but the market response was subdued and volatility remained low. That combination resulted in a move to higher prices after December, and it could well be that the same is setting up now.

Even with this week's decline, though, $SPX remains in an uptrend. The pullback so far has only tested one support level, and all of the moving averages continue to slope upward. Hence it is a bullish chart.

2016 Tax Considerations: Section 1256 Contracts

By Lawrence G. McMillan

We usually try to run an article on this subject at least once during tax season. I realize that not everyone is aware of the rules governing Section 1256 contracts. Hence, since tax season is upon us, I thought this review might be of benefit to some of our subscribers – and to options and futures traders, in general.  Section 1256 trades include all futures trades, as well as futures options. They also include option trades on cash-based indices ($OEX and $SPX, and especially $VIX), but not SPY or QQQ, for example, for the underlying in those cases is an ETF, not cash.

Consecutive Days above the +4σ “modified Bollinger Band”

By Lawrence G. McMillan

The $SPX Index has stayed above the +4σ “modified Bollinger Band” since Feb 13th – a total of 13 trading days and counting.  This is rather rare, so we thought it might be interesting to see just how unique this is – and to see what happened at similar stages in the past.  In the following paragraphs, “days” refers to trading days.

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.

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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