Lawrence A. Cunningham’s Quality Investing: Bears control the stock market for now, but these takeover plays can keep the bulls satisfied

by | Mar 2, 2023 | Stock Market

The stock market, as measured by the S&P 500 Index
has continued to decline after its false upside breakout of early February. February is statistically the worst month of the year, and this February just concluded was certainly a negative month – although it remains to be seen if it will be the worst month of this year.  SPX has been under pressure since that false breakout. There is minor resistance at 4020 and then heavy resistance from 4080 up to 4200. On the downside, there is support at 3900, and stronger support from the late-December trading range between 3760 and 3850. 

Also, the fact that SPX broke out from a triangle formation (blue lines on accompanying chart) only to fall back below the apex of the triangle is a further negative.

The McMillan Volatility Band (MVB) sell signal remains in effect. SPX has traded down to and touched the -3σ “modified Bollinger Band.”  The target for the MVB sell signal is the -4σ Band, which is currently at about 3920 and moving sideways for the moment. Equity-only put-call ratios remain strongly on sell signals. They curled over recently and began to rise. Our computer analysis programs confirm that both are on sell signals now. The weighted ratio’s signal came from a very low position on its chart — i.e., from an extremely overbought condition. That normally indicates a strong signal.

Market breadth has been generally negative, and both breadth oscillators have suffered. There …

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