The stock market, as measured by the S&P 500 Index
SPX,
decisively broke out over 4400 a couple of weeks ago. Since the October 27th low, the U.S. benchmark index has rallied more than 450 points. That qualifies it as being overbought, but “overbought does not mean sell.” We don’t have any confirmed sell signals yet, but they might not be far off. SPX is approaching its 2023 yearly highs, just above 4600. That might prove to be a resistance area, but if it is overcome, then the market will set its sights on the all-time high just above 4800 (set in January 2022).
For the past couple of weeks, SPX has been trading above the +4σ “modified Bollinger Band” (mBB). On November 29th, SPX closed below the +3σ Band, which is a “classic” mBB sell signal. The index didn’t really trade down through the band as much as the bands are rising, and the +3σ band surpassed the price of SPX. Regardless, we don’t trade the “classic” signals, but this is a possible precursor to a full-fledged McMillan Volatility Band (MVB) sell signal which we do trade. That MVB sell signal will occur if SPX trades at 4533 or lower. Not every “classic” signal becomes a MVB signal, though, so wait for the confirmation before entering into a bearish position. Equity-only put-call ratios are dropping more rapidly now. The amount of put buying has decreased dramatically, and the amount of call buying is increasing accordingly. As long as these ratios are declining, that is bullish for the broad stock market.
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SPX,
decisively broke out over 4400 a couple of weeks ago. Since the October 27th low, the U.S. benchmark index has rallied more than 450 points. That qualifies it as being overbought, but “overbought does not mean sell.” We don’t have any confirmed sell signals yet, but they might not be far off. SPX is approaching its 2023 yearly highs, just above 4600. That might prove to be a resistance area, but if it is overcome, then the market will set its sights on the all-time high just above 4800 (set in January 2022).
For the past couple of weeks, SPX has been trading above the +4σ “modified Bollinger Band” (mBB). On November 29th, SPX closed below the +3σ Band, which is a “classic” mBB sell signal. The index didn’t really trade down through the band as much as the bands are rising, and the +3σ band surpassed the price of SPX. Regardless, we don’t trade the “classic” signals, but this is a possible precursor to a full-fledged McMillan Volatility Band (MVB) sell signal which we do trade. That MVB sell signal will occur if SPX trades at 4533 or lower. Not every “classic” signal becomes a MVB signal, though, so wait for the confirmation before entering into a bearish position. Equity-only put-call ratios are dropping more rapidly now. The amount of put buying has decreased dramatically, and the amount of call buying is increasing accordingly. As long as these ratios are declining, that is bullish for the broad stock market.
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