By Lawrence G. McMillan
Stocks continue to remain in bearish trends. There have been some sharp rallies, but none of them has even reached the now-swiftly-declining 20-day moving average. There is heavy resistance at 1990, with support at 1900 and 1860. Below that, the next target would be 1820.
Put-call ratios have reached extremely high (oversold) levels. The standard equity-only ratio has given a buy signal (Figure 2) But the weighted ratio has not (Figure 3).
At the current time, both breadth oscillators are on buy signals once again. Even though these are intermediate-term buy signals, we usually require confirmation from at least one of the other intermediate-term indicators in order to validate the breadth oscillator buy signals.
$VIX remains in an uptrend, and that is bearish for stocks. In my opinion, $VIX would have to close the gap on its chart at 19 (i.e., it would have to close below 19) in order to turn bullish.
In summary, the intermediate-term indicators generally remain negative: downward trend in $SPX; upward trend in $VIX; new highs in most put-call ratios; and failure of breadth to maintain buy signals. Near-term, there are oversold conditions building up once again, but they have only produced sharp, but short-lived rallies so far..
This Market Commentary is an abbreviated version of the commentary featured in The Option Strategist Newsletter.
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