fbpx Weekly Stock Market Commentary 1/15/16 | Option Strategist

Weekly Stock Market Commentary 1/15/16

By Lawrence G. McMillan

The fall in the price of $SPX has continued, adding to the worst start of any year -- ever. As a result, there are severe oversold conditions, and buy signals are pending on many fronts. But few buy signals have been confirmed, and markets can continue to decline precipitously while they are oversold.

$SPX declined to the August-September 2015 lows, and that should represent support. If that level gives way, it could unleash another round of heavy selling. The next support level would be at 1820, which is the October 2014 and April 2014 low.

Equity-only put-call ratios continue to rise, and thus they remain on sell signals. There will not be a buy signal until they peak and roll over.

Market breadth has been terrible, and it continues to be a big problem for this market. Both breadth oscillators remain on sell signals, and they remain in deeply oversold territory.

That brings us to volatility, which has not been nearly as bearish as one might expect. With the market suffering such a large loss since the beginning of the year, I would have thought that $VIX would be much higher. It seems to me that the lackadaisical performance by $VIX is more symptomatic of a lack of fear, and that's certainly not bullish for the market.

$VIX is now in an uptrend, which is bearish for stocks as well. In summary, the oversold conditions continue to build, and they will inevitably lead to buy signals. But oversold rallies are sharp and short-lived. The intermediate-term outlook remains bearish.

This Market Commentary is an abbreviated version of the commentary featured in The Option Strategist Newsletter.

The Option Strategist Newsletter $29 trial

Share this

Option Strategist
Blog Search

Recent Blog Posts

Trading or investing whether on margin or otherwise carries a high level of risk, and may not be suitable for all persons. Leverage can work against you as well as for you. Before deciding to trade or invest you should carefully consider your investment objectives, level of experience, and ability to tolerate risk. The possibility exists that you could sustain a loss of some or all of your initial investment or even more than your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading and investing, and seek advice from an independent financial advisor if you have any doubts. Past performance is not necessarily indicative of future results.
Visit the Disclosure & Policies page for full website disclosures.