Lawrence G. McMillan: How you can use the stock market’s ‘January Defect’ to your advantage

by | Jan 12, 2023 | Stock Market

The U.S. stock market has been in a positive mode since the the S&P 500
rose above 3880 recently. Now, the index has succeeded in overcoming resistance at 3940, and that should be a major bullish signal. There is the matter of a short-term negative seasonal pattern (see the Market Insight) section, but that will dissipate in 10 days or so.

The S&P 500 chart remains in a downtrend, but its breakout over 3940 could augur for another test of resistance at 4100 — the December 2022 highs. The downtrend line that defines this bear market is below that level now. Also, the important down-trending 200-day moving average of SPX is, too, as both are at roughly 4000. All of these could provide resistance, so a breakout above 4100 would be extremely bullish — at least for a while. Equity-only put-call ratios have recently peaked and fallen back, so they are now on buy signals. That is a strong development as well. The total ratio is also trying to form a buy signal at this time. Breadth has been fairly strong, and both breadth oscillators are on buy signals. They are also in overbought territory, but that can be a good thing when SPX is first starting a new leg upwards (which it appears …

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