Join Larry McMillan as he discusses the current state of the stock market on December 27, 2022.
Stocks continue to struggle after $SPX broke down through the 3900 support level a week ago. The end of the trading year typically brings with it a short-term rally, classified as the "Santa Claus Rally" by the late Yale Hirsch.
The CBOE’s Volatility Index ($VIX) gets a lot of attention from both technical analysts and the media. That was the case this week, as $VIX spiked higher – rising to 25.84 intraday on December 13th, before reversing sharply downward after the CPI number was released. It closed that day at 22.55, more than 3.00 points below its high, and that generated a $VIX “spike peak” buy signal, by our definition.
Stan Freifeld and I started McMillan Options Mentoring 17 years ago to train students how to trade options successfully while reducing the inherent risks. Earlier this year, Stan decided not to take on any additional mentoring students. He will continue to lead the program and provide hourly consulting services to our customers.
The stock market ($SPX), has continued to rally this week, so the bullish case gained some traction across a number of factors. The close above resistance at around 4000 was a positive step in terms of price and sets up a move to at least the 200-day moving average or the 4070-4100 area.
There are actually three different positive (bullish) seasonal systems that occur between Thanksgiving and the start of the new year. In short, they are 1) the post-Thanksgiving rally, 2) the “January effect,” and 3) the “Santa Claus rally.” These encompass the entire period between the close of trading on the day before Thanksgiving through the second trading day of the new year. Moreover, small caps stocks (as measured by the Russell 2000 Index [$RUT, IWM]) normally outperform large-cap stocks over that time frame. We will describe the system below, but if you want more background, you might refer to the November 14, 2014, issue of TOS (Volume 23, No. 21), although there are other articles scattered over the years that discuss this system.
Join Larry McMillan as he discusses the current state of the stock market on November 14th, 2022.
The rally that began in mid-October was a fairly strong one that was backed by massive oversold conditions that existed at the time. By the time it got to 3900 (400 points off the lows), it was a bit vulnerable, and when Fed Chairman Powell made some very negative comments, the market quickly gave back 200 points. After that FOMC meeting, the market remained rather leery of the CPI data that was to be released early in the morning of November 10th. So, it traded in that 3700-3900 range while it waited. The CPI data was modestly encouraging (although it remains to be seen what the Fed thinks of it), and the market exploded to the upside as many traders and investors think that interest rates have peaked.
Join Larry McMillan as he discusses the current state of the stock market on November 7th, 2022.
