Stocks have struggled a bit over the past week, but not to any great extent. Support has held in the 2950-2960 range. That has preserved the bullish gap on the chart that extends down to major support at 2940. If $SPX were to close below 2940, that would be a direction-changer, from bullish to bearish. But so far, it hasn't even been tested.
It turns out that the strange behavior in $VIX9D on Monday, when it was down –4.85 while $VIX and other CBOE Volatility Indices, as well as $SPX, were relatively unchanged was due to a computer malfunction at the CBOE. Yesterday morning, when the market was still rather stable, $VIX9D was up almost 4 points, with $VIX again relatively unchanged; the computer error had been corrected. I don’t know if there well be an updating of the Monday prices for $VIX9D, but probably not. So, anyone using $VIX9D as an indicator or as part of a trading system should be aware that Monday’s prices were erroneous...
Yesterday, the 9-day Vol Index dropped from 14.68 to 9.83! This was not some arithmetic quirk with expiring options or a holiday or anything like that. This was a true drop in the price of near-term $SPX options. $VIX9D is based on the Sept 27th and Oct 4th expirations. $SPX was essentially unchanged yesterday (down 23 cents). Here is what happened to the at-the-money put – the 2990 strike:
Once $SPX broke out over resistance at 2940, especially considering that it was a strong gap breakout, it has not looked back. There was a slight consolidation in the 2960-2980 range, and now the Index is apparently on its way to challenge the all-time highs at 3025. The chart will be bullish as long as $SPX continues to close above 2940.
Equity-only put-call ratios continue to drop and thus they remain on the buy signals that were generated in late August.
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...The market seems a little tired, but there are no confirmed sell signals at this time. As an aside, though, we have always kept track of the Arms Index (named for the late Dick Arms, its inventor, but sometimes also called the TRIN). It seems to have lost some relevance in recent years, but there is one thing that is noticeable: when the 10-day moving average of Arms gets down to 0.81 or lower, a tradeable market correction is not far off. The last few times this has happened, the 10-day MA of Arms fell to that level and then rebounded sharply, leaving a “V” on its chart. It is at that level now. It is rare for the Arms Index 10-day MA to drop this low. The last few times it was this low are listed below, along with a quick summary of what happened next.
Once $SPX broke out over resistance at 2940, especially considering that it was a strong gap breakout, it has not looked back. There was a slight consolidation in the 2960-2980 range, and now the Index is apparently on its way to challenge the all-time highs at 3025. The chart will be bullish as long as $SPX continues to close above 2940.
Equity-only put-call ratios continue to drop and thus they remain on the buy signals that were generated in late August.
$SPX has broken out above resistance at 2950, and that has changed the picture to a bullish one. There is now strong support at 2940 the top of the previous trading range that $SPX traversed six times (three up, three down) during the month of August. A close back below 2940 would be negative, because that would bring $SPX back into the trading range once again.
Teh equity-only put-call ratios remain on buy signals, and now the Total put-call ratio has joined in with a buy signal as well.
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Once again, $SPX has traversed the 2825 to 2950 range twice in the past week. First, it fell nearly the entire length of the range in one day (August 23rd) and then has come all the way back to the top of the range in the remaining four days. A breakout above 2950 would be bullish, but a breakdown below 2825 would be very bearish.
In a somewhat major new development, both equity-only put-call ratios have rolled over to buy signals in the last two days.
