We are excited to announce the release of Option Workbench 3.0 on February 15th, 2014. I will be giving live demonstrations at the New York Trader's Expo in the McMillan Analysis booth (#5409) in the exhibit hall located on the 5th floor from February 16th through February 18th.
Yesterday saw steady rally for nearly the entire day. That had some ramifications beyond merely an oversold bounce. However, it’s what has happened overnight that has been extremely volatile and interesting. First, just after yesterday’s close, Turkey announced that they were intervening on their currency, and S&P futures rallied 13 points from yesterday’s close.
The incessant march upward has run into a bit of a roadblock. The 1850 level on the Standard & Poors 500 Index ($SPX) has proven to be stiff resistance. The failure of the market to clearly break through to new all-time highs has put the bears (temporarily?) in charge. There is most likely going to be a challenge of support at the 1810 level (see Figure 1) soon.
Equity-only put-call ratios have both rolled over to sell signals.
Larry McMillan was recently interviewed by Bob Lang of Explosive Options where he discussed the finer points of options, volatility and measuring sentiment. Watch the video by visiting ExplosiveOptions.net.
If there is a theme to this market, it's this: it's overbought, but continuing to rise. There is strong support for $SPX at 1810. Moreover, there is now resistance near 1850.
Now for the litany of bullish, but overbought indicators: Equity- only put-call ratios are typical of this group. Both ratios are declining, and that is bullish. In addition, both ratios are at the lowest levels on their chart and that means they're overbought.
Forecasting this market with the Fed doing what they’re doing is really a very inexact chore. However, there are some historic parallels that can be drawn.
(MarketWatch) -- Monday’s sharp selloff proved that the bears do have some life. But is it enough to actually cause a noticeable stock market correction? The bulls have gotten a little too full of themselves, pushing the market into an overbought condition that is somewhat unusual.
Recently, the “Skew Index” published by the CBOE shot upward, creating discussions around the option trading community as to its meaning. In the feature article, we take an in-depth look at whether a high $SKEW reading should call for caution in the stock market.
We always publish a table of the skew in $OEX options (page 9 in this issue), as a sample of how the major index options are skewed. We also talk about skew in relation to individual stocks and for particular strategies (horizontal skews for calendar spreads, or vertical skews for ratio spreads, for example).
