This week, $SPX finally tried to break down. But support held at or near 2120, reinforcing that as a major support area. So that remains a key level the level at which the $SPX chart would turn bearish, if broken.
Equity-only put-call ratios are not buying into the bearish argument just yet. They are both moving lower on their charts, which maintains their buy signals.
The CBOE recently listed a Condor Index (symbol $CNDR). It is a benchmark index designed to track the performance of a hypothetical option trading strategy that sells a rolling condor spread. The index uses $SPX options, which settle for cash on a monthly basis (“a.m.” settlement). The hypothetical spread is rolled monthly.
Stock prices have dampened down into a very narrow trading range again. There is major support at 2120 and major resistance at the old highs (2195). A breakout from those levels would be significant.
Stocks have tried to find a catalyst to spur them in one direction or the other, but they have been unable to do so. $SPX is locked into the 2120 - 2195 trading range. A clear breakout in either direction should be respected.
In the last few years, we have been trading the seasonal systems following June and September expiration. By "expiration," we mean the third Friday of the month (the "old" definition of "expiration"). The market usually declines in the week after June and September expiration. This doesn't hold true for March and December, for reasons that are not immediately clear, but that is somewhat irrelevant. This year, this seasonal trade could fit in well with the recent bearish tone of this market.
Last Friday, the market broke down through support – and did so in a big way. This current breakdown has changed the status of the $SPX chart from “bullish” to “neutral” at best. One could make a case for $SPX now being volatile within a trading range of 2120 to 2160. But if that 2120 support area is taken out, the chart will definitely be in a “bearish” status.
A violent rebound occurred yesterday, signaling that either a) Friday’s move was an aberration, or b) volatility has returned with a vengeance. Today, S&P futures are down 17 points in overnight trading, for no specific reason. There has just been a continual erosion all night long. That would argue for b) above. We are now getting mixed signals from some reliable indicators. These will sort themselves out, but for now there is some conflict.
