Join Stan Freifeld, Director of Corporate Services and head option mentor at McMillan Analysis Corporation for this complimentary webinar recording. Assuming full regulatory approval by the SEC, Binary Return Derivatives (affectionately known as ByRDs), will begin trading in September of 2014. This new and innovative product has characteristics that are similar to Puts and Calls but there are also some significant differences.
There is support for $SPX at or just below 1950. In addition, there is support at 1925 (the lows from a couple of weeks ago), and then there is major support at 1900.
The one deteriorating area among our main indicators is the equity-only put-call ratios. Both have started to rise over the past three days, and the weighted ratio is now officially on a sell signal.
This seasonal trade first came to my attention last year, but when I heard about it, the system had already been entered. So, I wrote it on my calendar for this year, and the time has arrived. As it turns out, it is one of the few confirmed bearish signals out there right now (no, I don’t count the myriad of overbought conditions as “confirmed bearish signals;” they would have to generate actual sell signals to be confirmed).
Larry McMillan was recently interviewed on the Benzinga PreMarket Prep show where he discussed common option trading pitfalls, the benefits of option writing, the trend of $VIX, dynamic hedging, weekly options and much more. Watch the interview below.
Once again we see that nothing really can stop this bullish market. This week, there were three separate pieces of news/data that theoretically could have done so, but they had little effect.
So $SPX is now trading at new all-time highs. The "old" support level at 1900 is still in place, and now there is support at 1925 (last week's lows).
Equity-only put-call ratios remain solidly bullish, although they are very low on their charts (Figures 2 and 3) and are thus reaching overbought status.
...Volatility indices ($VXST, $VIX, and $VXV) literally collapsed yesterday. They were down in the morning after Tuesday’s somewhat surprising strength, but on Wednesday afternoon, they were really crushed. Short-term vol ($VXST) was down 16.7%, while $VIX was down 12% – pretty big moves. This has several implications. The first is that our “bearish demarcation” line of 13 for $VIX was pretty good.
The feature article discusses ways in which the market is “overbought,” from time spent above the 200-day moving average, to the time since a 10% correction has occurred, to the low state of the volatility indices. In essence, though, these are not sell signals, for the market can continue to rally even while it is overbought.
As far as the $SPX chart is concerned, it has support at 1900. In fact, there is really support all the way down to 1860. A close below 1860 would change things, turning the chart to a bearish state if that were to happen.
Equity-only put-call ratios remain on buy signals. The standard ratio (chart, Figure 2) finally got in synch with the weighted ratio and issued a buy signal a couple of weeks ago.
There are many ways that analysts have been disseminating statistics that show the current market environment is at historic levels, not only in terms of price, but in terms of the length of time it’s gone without corrections of various magnitudes.
The market is tired and overbought, but even so it managed to claw its was back yesterday afternoon, reducing the losses to mere fractions. As a result, the indicators closed in their previous bullish states. However, today there is some selling. Ostensibly this is because of a negative World Bank growth forecast. But in reality, plenty of people see the overbought condition and are looking for an excuse to sell. We would rather wait for actual sell signals.
