Both the Crash of ‘29 and the Crash of ‘87 – two of the worst days in market history – occurred exactly 55 calendar days after the market had made an new all-time high. In other words, 55 days after the top, people are getting anxious. For those who believe in this theory, rather than coincidences, it supposedly has something to do with Fibonacci and/or biorhythms – who knows?
I can’t believe that I forgot about to mention this in advance. That date has passed in this cycle. So far, the all-time high was made on August 15th, at 2193.80 on $SPX. Fifty-five calendar days later was October 9th, which passed without incident.
The chart of $SPX (Standard & Poors 500) continues to have a slightly negative bias to it. There is a clear series of lower highs on the chart. Moreover, the trend line from the January lows has been broken.
Equity-only put-call ratios are both technically on sell signals at this time, according to the computer programs that we use to analyze these charts. However, to the naked eye, they are more or less moving sideways.
Market breadth has deteriorated badly this week. This negative breadth has pushed the breadth oscillators into officially oversold territory. They are on sell signals now.
This article was originally published in The Option Strategist Newsletter Volume 9, No. 05 on March 9, 2000.
Two issues ago, we wrote about the effects of changes in implied volatility on a call bull spread. Several readers asked about similar effects on other “common” positions – especially on put spreads – so we’ll expand on that theme this week
The time of the year for the October seasonal trade is at hand. This is one of our best seasonal trades – to buy “the market” at the close of trading on October 27th, and to sell the position at the close of trading on November 2nd. However, we do not take the trade in years when there was not a pullback in October.
Time Warner (TWX) agreed to be bought by AT&T (T). The deal is worth $107.50 – consisting of $53.75 in cash and $53.75 in AT&T stock. The stock portion has collars: TWX shareholders will receive a maximum of 1.437 shares of AT&T, but will not receive less than 1.30 shares of AT&T. Those two limits on the shares are equivalent to AT&T stock prices of $37.411 and $41.349, respectively (Just divide the share limits into the $53.75 stock value to get those prices).
Stocks appear to be struggling a bit, but there hasn't been a decisive breakdown. The $SPX chart shows some negative trend lines, but the important area is support at 2120. As long as that holds, the bulls will remain in charge.
Equity-only put-call ratios (Figures 2 and 3) have been wavering back and forth -- especially the normally more reliable weighted ratio. The standard ratio has been moving higher for a week or so, and it is on a sell signal. The weighted ratio has essentially been moving sideways. The computer analysis programs rate it as a "buy."
Market breadth has been a bit more decisive. Both of these breadth oscillators are now on buy signals.
The recording for head McMillan Options Mentoring mentor Stan Feifeld's latest webinar is now available below or by clicking here. To take advantage of special offers tied to the event, or to receive a PDF of the slides accompanying the presentation, click here.
This article was originally published in The Option Strategist Newsletter Volume 12, No. 11 on June 12, 2003.
Admittedly, option traders’ “hot” topics may sometimes be pretty boring to the average guy, but this question (above) has been the subject of much discussion amongst all manner of stock market analysts. Recently, the various volatility averages began to rise, even while the broad stock market was rising. This is something that hasn’t happened for a few years, and it also seemed to go against the “conventional” (and I should mention, incorrect) volatility analyses that one is often subjected to when watching financial TV these days. So, just what does this rise in volatility mean, coming as it does during a period of rising prices? That’s what we’ll explore in the feature article in this issue.
This week, $SPX finally tried to break down. But support held at or near 2120, reinforcing that as a major support area. So that remains a key level the level at which the $SPX chart would turn bearish, if broken.
Equity-only put-call ratios are not buying into the bearish argument just yet. They are both moving lower on their charts, which maintains their buy signals.
Market breadth has been relatively negative, and both breadth oscillators remain on sell signals. Frankly, I'm surprised that breadth wasn't worse yesterday, when the 2120 level was first tested.
This article was originally published in The Option Strategist Newsletter Volume 13, No. 19 on October 15, 2004.
Despite a modest, recent rise in $VIX, the CBOEs Volatility Index remains very subdued – as it has since March of 2003, and especially for most of this year. There are some general relationships between the broad market and $VIX, and there is a good deal of price history to justify those relationships. However, there have been recent articles published in several forums that suggest many traders seem to think it will be different this time – that $VIX isn’t predicting the same sorts of things that have happened in the past. In this article, we’ll explore those suppositions and try to outline some things to look for – from both $VIX and from the broad stock market.