The market, as measured by the Standard & Poors 500 Index ($SPX), had been laboring at new highs, near 2120. Then, last Friday it broke down below support at 2090, which turned the chart bearish.
Equity-only put ratios curled upwards late last week and gave confirmed sell signals on both the weighted and standard ratios. See Figures 2 and 3.
We usually try to run an article on this subject at least once during tax season. I realize that not everyone is aware of the rules governing Section 1256 contracts. Hence, since tax season is upon us, I thought this review might be of benefit to some of our subscribers – and to options and futures traders, in general.
Ivers Riley, a long-term friend and business associate, died February 17th at his home in Savannah, Georgia. I met Ivers in the early 1980's when he was a cofounder of The Options Group – a consulting firm specializing in all the “new” forms of options that existed at that time (currency options and index futures, primarily, as I recall).
The market has gone dull after making new all-time highs. The chart of $SPX remains bullish, in that it remains above support.
Equity-only put-call ratios remain bullish as well. They continue to decline on their charts, yet they are not so low as to be considered overbought.
Market breadth has been a problem for some time now. Both breadth oscillators rolled over to sell signals this week, and both remain there at this time.
When we first wrote about the “$VIX Crossover” system, we only analyzed it from the viewpoint of buy signals. In the feature article in this issue, there is an update and review of the “buy” portion of the system. Then there is also an analysis of the reverse part of the system – the “sell” signal. Also, the $VXST Crossover system is reviewed.
We have written about crossover signals from the CBOE’s Volatility Indices in the past. In particular, we want to present research on sell signals generated when $VIX rises above $VXV. But first, we want to update the statistics on the systems that we have presented previously, with regard to these crossovers.
The stock market continues to move higher, albeit at a very slow pace. That makes the $SPX chart bullish, of course, and it will remain bullish as long as $SPX holds above support. The highest support level is the 2090-2100 range that $SPX traded in last week.
$SPX has finally broken out to new all-time highs and has maintained that status by closing above the old highs for four consecutive days. That's the bullish news. The less-than-bullish news is that the breakout is not being confirmed with any resound by some of the other indicators. However, as long as $SPX remains above the 2065 support level, the bulls are in charge.
The Standard & Poors 500 Index ($SPX) has finally broken out of the 1990-2065 trading range that had contained it for nearly two months. The breakout was not easily achieved, nor is it uniformly confirmed by all of the other indicators, but it is in place.
As for support, there should be ample support at 2065 and at several levels below that, all the way to the bottom of the trading range, at 1990.
Now that January is past, most of the seasonal trades are over for this cycle. It was an interesting and somewhat profitable seasonal trading season, but it always behooves a trader or analyst to go over the results of a system while the data is still fresh. This can lead to adjustments – hopefully profitable ones – when the seasonal system rolls around the next time. Furthermore, if no adjustments are needed, it confirms that the system is continuing to work well.
