$SPX has not only violated support, but it has broken its modest uptrend line (red lines on the chart in Figure 1). It also has negated its pattern of higher lows (the two lows that, when connected, made that red trend line on the chart). So the chart is bearish. There are potential support lelves at 2620, 2580 (where the 200-day moving average is), and 2530 (the Feb lows).
An optimist would still see the bullishness in the $SPX chart, with the higher highs (mid-March vs. late February) and the higher lows. A pessimist would see failure to break out over 2790 this week as a major problem. So, one needs to watch resistance at 2790 and support at 2730 as significant levels.
The equity-only put-call ratios have remained solidly on buy signals.
The $SPX chart has improved greatly. The 20-day moving average and the "modified Bollinger Bands" have curled upwards. That is a very positive development, for that aspect of the chart is no longer in a downtrend. Now it must overcome resistance at 2790.
A major intermediate-term bullish development is that the equity- only put-call ratios have rolled over to buy signals. This happened in just the last two or three days, so these are fresh signals.
The first thing to note is that the $SPX chart is still negative. The chart in Figure 1 clearly has downtrending moving averages and Bollinger Bands. Those are dominating the action right now.
The equity-only put-call ratio charts remain on sell signals. The ratios are racing higher now -- especially the weighted ratio. It is at levels last seen in November, 2016, just after the election. As such, it is an oversold state.
As trading opened on Monday, February 5th, 2018, stocks had already been falling for a few days. Then on that day there was a major decline – the largest drop in point terms in history. The Dow was down 1,175 points. The S&P 500 Index ($SPX) was down 113 points. All other major stock indices suffered similar fates. Those net changes were effective as of the 4 p.m. (Eastern time) close of the NYSE.
At least one cannot say the market is boring, as might have been said a month ago. The daily ranges are still large, with both buy and sell programs springing up out of nowhere. The battle between the bulls and the bears seems to have settled in now, and there is a real question whether or not the rally can continue or whether it will have to retest the lows.
First and foremost, the $SPX chart still has a bearish look to it. This oversold rally has been very strong; there's no doubt about that. But oversold rallies often die out at about the declining 20-day moving average, or maybe just a little above that. This rally has just reached that level.
XIV: The Scapegoat of The Market’s Decline
As trading opened on Monday, February 5th, 2018, stocks had already been falling for a few days. Then on that day there was a major decline – the largest drop in point terms in history. The Dow was down 1,175 points. The S&P 500 Index ($SPX) was down 113 points. All other major stock indices suffered similar fates. Those net changes were effective as of the 4 p.m. (Eastern time) close of the NYSE.
In just nine trading days, $SPX is down 9.0% and has lost 291 points. That's a lot of distance in a short time. This decline has rolled nearly every intermediate term indicator into a bearish status, if it wasn't there already. It has also caused some massive oversold conditions to appear. But remember, "Oversold does not mean buy," and that is lesson that is harshly taught every time the market sells off like this.
