Weekly Stock Market Commentary 11/5/2021

By Lawrence G. McMillan

All of the major Indices have broken out to new all-time intraday and closing highs. This includes the "usual" $SPX, $DJX, and $NDX, but now they have been joined by the Russell 2000 ($RUT; IWM), although $RUT and $DJX did not join the party yesterday (November 4th). These charts are positive, and that dictates holding a long "core" position. There should be support at the breakout levels, which for $SPX is the 4525 - 4550 area.

Equity-only put-call ratios remain on strong buy signals that were first generated in mid-October. They are falling rapidly now since call buying in stock options has skyrocketed again. Eventually, they will bottom out and begin to trend higher. Then, and only then, will a sell signal be in place.

Market breadth is still skittish. It is noticeable that there has been negative breadth a couple of times this week, even while these Indices are all making new all-time highs. Normally, that would be a danger sign, but on alternating positive days, breadth has been tremendously positive. So that is keeping the breadth oscillators on buy signals and this time.

$VIX indicators have remained bullish for stocks, but $VIX itself is reluctant to give up too much ground. It is holding at 15, roughly. In a typical bull market like this, $VIX would be in the 12- 14 range or even lower. But big-money $SPX option traders are still a bit leery of what lies ahead and so are buying enough puts to keep $VIX somewhat elevated. I am becoming more and more convinced that we are going to have to see $VIX below 12 before this current bullish phase terminates. These $VIX bulls are going to have to give up their game.

For our purposes, we are retaining a "core" long position, in line with the bullish $SPX chart and the almost unanimous bullish signals from our indicators.

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