By Lawrence G. McMillan
The broad market, as measured by the Standard & Poor’s 500 Index has had a pretty good week. First, the 1,420 area was overcome, followed by a pullback to slightly below that level.
By Lawrence G. McMillan
Stocks continue to work higher. The main cause is the unwinding of previous pessimism (see put-call ratio charts, for example), although the media won’t believe that. They are certain it all has to do with the fiscal cliff. Regardless, we are beginning to see overbought conditions again, and a short-lived pullback might be in order. However, with the holiday period approaching, it is unlikely that there will be much activity after tomorrow, for much of the remainder of this year.
As we all know, Apple (AAPL) is down roughly 25% since its high in September. As one may expect, volatility has subsequently increased, resulting in various option trading opportunities. AAPL recently gave a confirmed put-call ratio buy signal. However one may be hesitant to "catch the falling knife" by purchasing the stock, or even going long calls outright.
By Lawrence G. McMillan
The stock market, as measured by the S&P 500 Index ($SPX), moved higher over the past week, overcoming resistance at 1420 and then also at 1430. However, since Fed Chairman Bernanke spoke on Wednesday, the market has pulled back. So far this pullback has caused only minimal damage to the technical indicators, and it would be a relatively simple matter for the bulls to regain control.
Put-call ratios have been strongly bullish and remain so today.
However, market breadth indicators are turning bearish.
By Lawrence G. McMillan
One of most important things an option trader watches is volatility. The daily Volatility History report in The Strategy Zone offers you the data you need to be a well-prepared option trader: three historical volatility levels, plus implied volatility, and the percentile of implied volatility.
By Lawrence G. McMillan
The stock market edged higher yesterday, which keeps alive the prospects of an upside breakout in the near future. Equity-only put-call ratios both made new relative lows on their charts, so that is quite bullish. Recall also that the Total put-call ratio moved to a new buy signal at Friday’s close. Breadth was especially positive in terms of “stocks only” data yesterday, and both breadth oscillators remain on buy signals.
By Lawrence G. McMillan
The market has drifted into a dull, waiting state. Despite what appeared to be upside breakouts last week, there was no follow- through. In the end, it will most likely come down to $SPX price once again. In recent days, $SPX has been bounded roughly by resistance at 1420-1425 and by support at 1395-1400. A breakout in either direction would likely create some momentum.
Equity-only put-call ratios have remained on buy signals.
Market breadth oscillators have deteriorated, but they still remain on buy signals (barely).
By Lawrence G. McMillan
There are various trading strategies -- some short-term, some long-term (even buy and hold). If one decides to use an option to implement a trading strategy, the time horizon of the strategy itself often dictates the general category of option which should be bought -- in-the-money vs. out-of-the-money, near-term vs. long-term, etc. This statement is true whether one is referring to stock, index, or futures options.
By Lawrence G. McMillan
MORRISTOWN, N.J. (MarketWatch) — Bullish and bearish forces are both at work, technically as well as fundamentally. Thus, the market is at a point where it could rise sharply or fall sharply — an inflection point.
These matters should be resolved in the days ahead, although the “noise” emanating from the fiscal-cliff discussions may attempt to distort things.
