Editorial Comment: A potentially dangerous trend

By Lawrence G. McMillan

When $SPX broke down below 2420 last week, and there was a bit of panic selling, the term structure of the $VIX futures (and of the CBOE Volatility Indices)  immediately inverted in the front end, and the futures went to a discount.  That was a bit surprising and certainly premature from a historical perspective.  After all, if the $VIX futures are going to trade at a discount with $VIX at 15, where are they going to be if $VIX explodes to 40 in a real market decline?  Yes, it turns out that the market rebounded, so that “discount” was justified by what happened later, but was it really justified at the time?  I don’t think so.  

Weekly Stock Market Commentary 7/14/2017

By Lawrence G. McMillan

First and foremost, the most bullish of our indicators is the $SPX chart itself (although some of our other indicators seem to be grudgingly improving as well). The 2400 area has been rock-solid support and until that is broken the $SPX chart will remain bullish.

Equity-only put-call ratios are technically on sell signals, according to the computer analysis programs. However, the weighted ratio (Figure 3) has curled over, so its sell signal is weakening.

Years Ending in “7"

By Lawrence G. McMillan

We wrote about “years ending in ‘7'” earlier this year. The pattern is that these are bad years for the stock market, for the most part. They generally start off fine and rally into the summer or even the fall, and then the wheels fall off. I will try to work up an article with some more specifics on this trend, but I wanted to remind subscribers that this a year to treat breakdowns – especially in the latter part of the year – with respect.

Weekly Stock Market Commentary 7/7/2017

By Lawrence G. McMillan

This stock market has been able to avoid a meaningful correction for quite some time. But now $SPX has closed below support at 2420, and the failed upside breakout of mid-June is looking like a big negative item on its chart, as well. Of course, several times in the recent past, it seemed as if $SPX were about to succumb and it didn't. Can $SPX pull this escape act off once again? If it can hold support at 2400, it will.

Weekly Stock Market Commentary 6/30/17

By Lawrence G. McMillan

A real battle has developed around the 2420-2440 area of $SPX. That has been the trading range for the entire month of June, but recently there have been some violent moves within the range, including some failed attempts to break out of it. As a result, this is setting up a more important breakout, once $SPX can find its way to clearly break out of the range.

To the casual observer, not much has been happening, but to the trader who is involved daily, there have been some interesting feints and failures.

Chandelier Stops

By Lawrence G. McMillan

We use Chandelier Stops for most of our trailing stops.  We have been asked to explain how to calculate the Chandelier Stop, so here is the explanation.  We use a 10-day period.  That variable can be changed to suit your taste.  The longer the period, the “looser” the stop will be, as compared to the current underlying price.  If you Google this subject, you may see longer time periods (22 days, for example) being used.

Weekly Stock Market Commentary 6/23/17

By Lawrence G. McMillan

This past Monday, $SPX broke out to new all-time highs, smashing through the resistance area at 2440 in a strong manner. Then, just as abruptly, stocks have fallen since then, declining back into the previous 2415 2440 trading range. Both moves would ordinarily portend bigger moves, but in fact both were duds.

The support levels are still intact for $SPX, as is the 20-day moving average ($SPX hasn't closed below that simple MA for about a month). Support is in the 2415-2420 area, where several selling attempts failed in mid-June. Below that, the very important support area at 2400 is still intact as well. As long as those support levels are in place, the $SPX chart remains bullish.

Previous $VXO/$VIXMO Sell Signals (Preview)

By Lawrence G. McMillan

I thought it might be interesting to see how previous $VXO/$VIXMO sell signals have played out.  We have written plenty about this particular signal, which occurs very rarely – only when $VIX is near the 10 area, which is had been for a while now.  The actual signal is this: 

when $VXO closes below 10 and $VIXMO closes below 10.5,
that is a short-term sell signal for the stock market.  

Once the signal is given, $SPX usually declines sharply, almost immediately, but the decline is short-lived.

Weekly Stock Market Commentary 6/16/17

By Lawrence G. McMillan

It seems that no matter how strongly the market seems to sell off early in the day, it recovers almost all of those losses by the end of the day. As a result, the $SPX chart remains bullish. Subscribers know that we place a great deal of importance on the $SPX chart's trend, and as long as $SPX holds above support, the outlook for the overall market remains intermediate-term bullish.

Equity-only put-call ratios are probably our most negative indicator. Both ratios have been on the rise since early June and both are on confirmed sell signals -- confirmed by the naked eye as well as the computer analysis programs.

Weekly Stock Market Commentary 6/9/17

By Lawrence G. McMillan

A week ago, on Thursday, $SPX had broken out strongly to a new all-time high. It followed up with a modestly positive day the next day. On both days, "stocks only" cumulative breadth made new all-time highs as well, confirming the breakout.

However, since then, $SPX has traded in a very small and tight range for four consecutive days. A mere 15-point range has contained all four days' worth of trading. While this is annoying, it doesn't change the fact that the $SPX chart is bullish as long as $SPX continues to close above 2400.

Equity-only put-call ratios have curled slightly upward, but for now they remain bullish, albeit quite overbought.

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