The broad stock market has continued to frustrate both bulls and bears by remaining within a trading range for quite some time. However, today, $SPX closed at a new all-time high and thus is on the verge of an upside breakout. While this produced much glee on CNBC, there could be problems once again if this breakout is not confirmed.
The simplest confirmation would be another $SPX close at new all-time highs, and this time above the all-time intraday high at 2125.92.
The stock market weakened considerably this week, and many of the indicators are now following suit with sell signals. But $SPX price action continues to frustrate both bulls and bears, as it refuses to trend higher or lower.
So now for $SPX, there is support at 2067 - 2072 (the April and May lows), with resistance above at 2125 (the all-time highs). Equity-only put-call ratios have deteriorated badly this week. Both ratios have rolled over to sell signals.
Stocks dawdled at or just above the previous all-time highs, but couldn't convincingly push through with a strong move. As a result, things began to deteriorate. Now, 2070 has some significance. If $SPX breaks down below 2070, a more bearish scenario should unfold.
Equity-only put-call ratios are still on buy signals. Both have "wiggles" curling upwards after Thursday's big down day, but they remain on buy signals.
Both bulls and bears are frustrated by recent action. Most recently, $SPX has made repeated attempts to challenge the all-time highs, but it has not yet been able to break out. There is resistance in the 2110- 2120 area that has contained all advances.
In any case, the $SPX chart is still neutral until it breaks out of the triangle in a convincing way.
We have very well-defined criteria for determining a major Total put-call ratio buy signal. These are powerful signals, worth a 100-point rise or more in $SPX. There have been twenty such signals since the year 2000, of which 11 have produced the desired 100-point gain, and three others produced smaller gains. The total $SPX points gained from the twenty signals is +960. So, these signals are not to be taken lightly.
The stock market has traded in an ever-narrowing range for over a month now. The most recent range has been bounded by 2090 on the upside and 2050 on the downside. But now $SPX is trying to break through 2090. Even if that is accomplished, there is still considerable overhead resistance at 2110-2120 (the all-time highs).
Most of the other indicators have taken on a more positive slant in the last week or so. As a prime example, the equity-only put-call ratios have turned bullish.
$SPX couldn't develop any momentum this week. Perhaps -- as the media were saying -- stocks were just waiting for the jobs report this morning. It was a very poor jobs report, and S&P futures are down 20 points. If $SPX does indeed open 20 points lower on Monday morning, that will be a violation of the 2040 support area. With that support level broken, $SPX prices are likely to test the lower support near 2000 or slightly lower.
When $SPX broke down through the 2090 support level, that was a very negative sign, especially since stocks failed at the old highs.
There is now strong resistance at 2110-2120 (the February and March peaks), as well as at 2090 (again). As for support, the initial support level will be 2040, the early March lows. Below that, there is support at 1970-1990, which is the area of the December and January lows.
In figure 1, the support at 2040 and the resistance at the recent all-time highs of 2120 are marked as a trading range. Until $SPX breaks out of that range, it really doesn't have a trend in place. To support that conclusion, the indicators are somewhat mixed.
Equity-only put-call ratios have remained on sell signals during this latest rally.
The market, as measured by the Standard & Poors 500 Index ($SPX), had been laboring at new highs, near 2120. Then, last Friday it broke down below support at 2090, which turned the chart bearish.
Equity-only put ratios curled upwards late last week and gave confirmed sell signals on both the weighted and standard ratios. See Figures 2 and 3.
