Weekly Stock Market Commentary 1/12/2018

By Lawrence G. McMillan

The chart of $SPX could not be more bullish. It is in a strong uptrend, well above all of its meaningful trailing moving averages, and continually making new all-time highs. Other indices are in similar shape, as far as making new all-time highs, but $SPX has the strongest chart of them all, going back to the election in November 2016. That's when this monster rally was launched, and it's still in full force.

There are now six unfilled gaps on the $SPX chart. I have marked them with horizontal purple lines on the chart in Figure 1.

The support areas are not that close to current levels because of the sharp, recent advance. The first -- and probably now most important -- support area is shown as red rectangular box in Figure 1. It is in the 2680-2700 area, from which this current 2018 rally was launched.

Equity-only put-call ratios have given up on recent sell signals and are now racing lower, making new multi-year lows every day. That means they are on buy signals until they turn upward.

Market breadth has been modestly positive in 2018, and as such the breadth oscillators have remained on buy signals -- even rising into modestly overbought territory.

Volatility is quite tame, as it has been for a long time. As long as it is stumbling along at low levels, stocks can rise. Low volatility by itself is not a problem. The problem comes when volatility moves from a low level to a higher level.

In summary, things are bullish. As long as $SPX is above support at 2700 and $VIX is below 13, the intermediate-term uptrend is intact.

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.