Thursday, September 13th, 2007
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Stock Market
The stock market continues to oscillate between roughly 1430 and
1490, basis $SPX. It has not been able to break out of that range for
more than a day, on a closing basis. Eventually, it will, of course. But
until we have confirmation of a breakout, we are going to continue to
treat this as a "trading range market." With the FOMC Meeting
coming up next week, we want to be especially careful of a false
breakout. It's possible that, if $SPX remains near the top of the range,
it might probe on through on a Fed rate cut of «%, say, but then fail
to hold it.
The equity-only put-call ratios remain on the buy signals
generated nearly three weeks ago (see charts, above). These are
important intermediate-term indicators, but they have been more or
less alone in their bullish stance.
Market breadth has been rather schizophrenic, just following the
market back and forth . The most recent breadth signals were sell
signals, generated last week. It's somewhat negative that this week's
strong rally hasn't pushed them to "overbought."
Finally, the volatility indices ($VIX and $VXO) have remained
at high levels, near 25. This has kept a persistent bearish spectre over
the market. Perhaps $VIX will drop after the FOMC Meeting next
week, but that is not a certainty.
In summary, if a breakout occurs, one can feel more comfortable
taking a directional position. Until then, aggressive accounts can use
short-term overbought/oversold indicators and systems to trade this
volatile market within the trading range.
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McMillan Analysis Corporation
PO Box 1323
Morristown, NJ
Info@OptionStrategist.com
www.OptionStrategist.com
(800)724-1817
