The broad market, as measured by the Standard & Poors 500 Index ($SPX) and other indices, has broken out to new all-time highs again. This time, the breakout quickly extended with a strong second day, and today added even more distance. This has turned the $SPX chart bullish.
This is the only issue to be published in May, and it is a “double issue.” The reason for this change in the publication schedule was an extensive travel schedule from April 30th through May 15th. While not technically twice the length, there are twice the number of articles.
One of the luxuries of publishing a “double issue” is that we can spread our range of topics out a bit. That’s what this article is about. It’s confirming and recounting some technical studies that have made their way around lately. They don’t necessarily have anything to do with the option market directly, but they certainly have to do with market direction and volatility. There are several technical studies presented in this article.
The stock market is proving to be frustrating to both bulls and bears. Despite chances for each, neither camp has been able to take control. The resistance level at 1900 for $SPX has thwarted the bulls, despite making marginal new all-time highs early last week. Conversely, the bears have had a couple of strong down days, but they have not been able to break $SPX down below support at 1860.
...Equity-only put-call ratios continue to remain split, with the standard on a sell, and the weighted on a buy. We plan to delve into why this is happening – in an article in this week’s Option Strategist newsletter – but the short answer is that traders are buying out-of-the-money, low-priced puts for protection.
It is hard to imagine a market any more perverse than this one. Once again, there has been a failure to break out on the upside, despite some favorable (although not unanimous) technical conditions. Now $SPX has pulled back into the previous trading range, whose limits of 1810-1900 are more secure than ever.
Tuesday saw very little follow-through to Monday’s strong day, and that was disappointing. Although $SPX and other major averages made marginal new all-time highs, it certainly didn’t look or feel like a good day. $SPX has technically broken out, and it has support all the way down to 1880, or even slightly below.
The stock market continues to frustrate all but the most short-term traders. Anyone looking for a trend to develop has not been able to find one in weeks. Wednesday's low at 1860 is support, as is the previous week's low at 1850. Below there, the April lows at 1810 are a major support level. Resistance, however, exists all throughout the 1880-1900 area.
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The stock market is stalled at the high end of its trading range (1810-1900). There is near-term support at last Monday's low of 1850.
Equity-only put-call ratios remain split. The weighted ratio continues to decline from a recent high, and that means it's on a buy signal, while the standard ratio remains on a sell signal.