The S&P 500 rose this week, pushing the bullish scenario forward.
Closing above the resistance at around 4,000 points SPX,
It was a positive move, and establishes a move towards at least the 200-day moving average (MA), or towards 4070-4100.
The McMillan Volatility Range (MVB) buy signal remains valid, with the “target” still off the +4σ MVB level (currently around 4150). Support is still around 3900 and most importantly 3800.
Call-to-sell ratios for stocks are only beginning to rise, with the CBOE ratio once again posting an extreme/suspicious reading at 1.34 (rarely higher than 1). This is likely to be bearish, but so far computer analysis continues to confirm that these ratios are buy signals.
Supply has been fluctuating between buy and sell signals lately, so we don’t rely heavily on this indicator at the moment.
Fresh 52-week highs vs. 52-week lows remain a long-term sell signal.
The VIX medium-term trend is still bearish, which is a bullish trend for stocks. Moreover, the Construction From the VIX futures curve slopes upward, with an increase in the premium of the VIX futures over the VIX index (approximately more than 2). So these are bullish signs. The first sign of trouble would be if the VIX rose by at least 3.00 points over a three-day period.
Seasonality is now turning bullish for stocks until the second trading day of the new year. The most notable exception to this usual bullish trend was late 2018, but it is generally reliable. In addition, small caps tend to outperform large uppercase letters during this period.
In short, the SPX chart is still in a downtrend, so the current high is still only a bearish high.
Stock prices and technical background coincide (short-term bullish) and seasonality also turns bullish. Therefore, the bullish case seems to have regained its momentum, but it is important to maintain positive price momentum. Closing below 3900 could change the rules of the game.
Follow up procedures:
All breakpoints are mental breakpoints unless otherwise stated.
We use a “standard” trading procedure for our SPY spread: on any vertical bullish or bearish spreads, if the underlying hits the short strike, roll over the entire spread. will be rolling above In the event of a bull call spread or roll down In the event of a bear outbreak. Stay on the same exhalation and maintain the same distance between strokes unless otherwise instructed.
long 2 Dec. (16e(375 lays and shorts Dec 2 (16e) 355 options: This is our “basic” bearish position. | As long as the SPX remains in a downtrend, we want to maintain the position here.
Long 1 SPY Dec (23Research and developmentCall 392 and short 1 SPY Dec (23Research and development) Call 408: This trade is based on the MVB buy signal, which was generated on the morning of October 4the. The objective of this trade is for SPX to trade in the +4σ upper band. The stop for this position will be if SPX closes below -4σ range. We’ll keep you posted if either group is affected.
300 KLXE LONG: Stop lifted at 14.50.
Long 2 wrk Jan (20e) calls 32.5: We will hold out as long weighted The buying and selling ratio remains on the buy signal.
Long 1 SPY Dec (2not available( 371 puts and Short 1 SPY Dec (2not available) 351 groups: When the offer was negative on the New York Stock Exchange on November 3Research and developmentWe have created this situation. Supply oscillators are no longer selling signals, so exit this position now.
Long 1 SPY Dec (9e(Call 390 and abbreviate 1 SPY Dec) 9e) Call 410: The spread is based on the rare buy signal of the stock-only call option ratio of CBOE. As a stop, we will close it if SPX closes below 3900 (note the stop price change).
Long 2KMB (20e) 125 calls: Roll to January (20e) 135 calls. We’ll hold these calls for as long as we can weighted The buy-to-buy ratio of KMB remains on its own buy signal.
Long 2 IWM Jan (20e185 Call Options at Parity and Short 2 IWM Jan (20e) 205 calls: This is our bullish seasonality basis between Thanksgiving and the second trading day of the new year. aWe will adjust this position if the IWM bounces back during the holding period, but initially there is no stop out for the position, so all transfer rate is at risk.
Long 2 PSX Jan (20e) 105 subtraction options: We will hold these put options for as long as weighted The buying and selling ratio remains on the sell signal. In other words, as long as the buy-to-buy ratio increases.
Send your questions to: lmcmillan@optionstrategist.com.
Lawrence G. McMillan is the President of McMillan Analysis, a registered commodity trading and investment advisor. McMillan may hold positions in securities recommended in this report, either personally or in client accounts. He is an experienced trader, money manager, and author of the best-selling book, Options as Strategic Investing. www.optionstrategist.com
Disclaimer:
© McMillan Analysis Corporation is registered with the Securities and Exchange Commission as an investment advisor and the CFTC as a commodity trading advisor. The information in this newsletter has been carefully compiled from sources believed to be reliable, but its accuracy and completeness are not guaranteed. Officers or directors of McMillan Analysis Corporation, or accounts managed by such persons, may hold positions in securities recommended in the advisory.