The final analysis on the $SPX chart is that it is still rising, with rising trend lines, and that means that it is still bullish. In the more traditional sense, there is support on the $SPX chart at 2210 and 2090.
First and foremost, it must be noted that the chart of $SPX is still in an uptrend. The 20-day moving average is rising, and no major trend lines have been broken. $SPX has rallied so hard and so fast since the election that it is quite a ways above support, which is 2210 and 2190. As long as that support holds, the chart of $SPX will arguably still be in an uptrend.
The S&P 500 index ($SPX) has tagged its upper “modified Bollinger Bands” (mBB) a couple of times recently, but in neither case was a sell signal triggered. So far, this has been the “correct” move, as $SPX has moved higher. Eventually, though, this sell signal will take place, and one should be prepared to act on it. Figure 5 shows a close-up of the recent action in $SPX.
The bullish juggernaut was finally slowed a bit this week by the Fed's decision to raise interest rates (or at least, that was the excuse for some profit-taking). However, the chart of $SPX remains very strong, and this is a period of highly bullish seasonality.
Put-call ratios are remaining bullish. Both equity-only put-call ratios are declining daily, although the pace of their decline has slowed over the past two days. Even so, a declining put-call ratio is bullish for stocks.
We are proud to announce that McMillan Options Mentor head mentor, Stan Freifeld, will be giving a complimentary presentation tommorrow. The title of the webinar is "Early Exercise: Strengthen Your Position" and will explain the difference between American and European style options plus discuss the theory and practical application of early exercise. Get more information and register for the webinar by clicking here.
Nearly every day, one hears a trader on TV telling you to “buy protection, because it’s cheap.” Is it, really? Yes, $VIX is low, so that means that overall implied volatility of $SPX options is low, and therefore by inference, one might think that $SPX puts are cheap.
It’s more complicated than that. It depends on two things that these commentators never mention – the skew of the $SPX puts, and the term structure of the $SPX puts (or the $VIX futures, if you prefer).
This has been a very strong week for the stock market. New highs have been registered by all the major indices. Not only have all of these major averages traded at new all-time highs, but these moves have been accompanied by strength from the technical indicators. The only problems that are cropping up are those from an overbought market, but as readers know "overbought does not mean sell."
