$SPX has broken to new lows for this move, taking out the support at 2437. That means that a test of the 2400 level is likely in the cards. There is resistance at 2480.
Even with the relative negativity of recent movements, it is worth remembering that as long as support at 2400 holds, the $SPX chart will remain positive.
By Lawrence G. McMillan
Today’s move saw $SPX blow right through the resistance at 1260 and also through the 200-day moving average at 1272. Those are both significant levels to have overcome. The market may have to spend some time around the 200-day moving average, as it often does when it passes through that level, but the next higher targets of 1310 and then the yearly highs at 1350-1370 should be within range fairly soon.
Equity-only put-call ratios remain on buy signals.
Are you worried that the wrangling over the debt ceiling might become a crisis for the stock market? A number of analysts are predicting dire results if the ceiling is not passed by the August 2nd deadline. In fact, some say that even now it's too late to keep the U.S. credit rating at AAA. I think the stock market as a whole is smart enough to discount these possibilities, and therefore such worries are probably overblown since the market is rallying, not plunging.
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By Lawrence G. McMillan
July $VIX settlement took place this morning. The official settlement price was 19.10, just slightly below last night's $VIX close of 19.21. All outstanding June futures and options contracts will settle at that price. For example, if you own a July 20 put and didn't sell it prior to today, it would settle for 0.90 ($90 per contract), since it is 90 cents in the money (20 minus 19.10).
Weekly put option sales have been added to the analyses in The Strategy Zone (SZ) and in the Option Work Bench (OWB).
Subscribers to The Daily Strategist that follow our weekly SPY sales, are up +18% in five months, in the ongoing position that we are running in that newsletter.
By Lawrence G. McMillan
For the first time since January 7, 2009, the CBOE Equity-Only Put-call ratio is above 1.00. On Friday (June 10th), nearly 880,000 puts traded, while slightly less than 860,000 calls traded. This is a rare occurrence -- as evidenced by the fact that there hasn't be a daily reading above 1.00 in 29 months.
On Friday, May 6th, the total put-call ratio (ALL options traded) was above 1.00. That is quite unusual, and when it occurs during a declining market phase, it is normally a strong buy signal. The last time this happened was March 15th and 16th. The market then rallied from 1256 to 1335 over the next month. There are nuances to this, of course, which will be discussed in our newsletters, but this is usually a sign that "too many" people have become bearish and -- by contrarian analysis -- the market should be bought.
Many of the major indexes have already made new post-2008 highs. This includes the Dow Jones Industrial Averag, the Russell 2000 Index, and the Value Line Index. The latter two are actually making all-time highs, having exceeded their 2007 highs.
Most people are not aware of just how strong the small-cap stocks have been. What has not made a new high (yet) is the Standard and Poors 500 Index (SPX 1,335, -0.85, -0.06%) . However, with these other indexes doing so, and with breadth being very strong of late, we expect to see new highs on SPX soon.
Several new volatility products have recently entered the market or will soon be listed for trading. The most promising of these is the new set of contracts to be listed on the Chicago Board Options Exchange. Trading began on March 25 in Gold Volatility Index futures on the CBOE. Options on them will be listed on April 12. Many other new products will follow in due course.
The rumor mill is running overtime lately, with takeover talk on the upswing in the markets. Most rumors don't lead to signed and sealed deals, and actual transactions aren't much discussed in advance. But mere talk about deals can lead to heavy and potentially profitable option activity, especially as one can attain a large amount of leverage if there is a big jump in a stock's price.
