By Lawrence G. McMillan
When the government announced that they were going to begin instituting tariffs, the market went into a quick nosedive, from which it has mostly recovered. But the fact is that $SPX remains volatile, and since it has not been able to make it back to new all-time highs, it is within a trading range. There is resistance at those highs, near 6100. On the downside, there are two horizontal support lines shown on the chart in Figure 1 — at 5860 and 5770. In addition, since the tariff-related selloff bounced off of 5925 last Monday, that is also a tentative support level.
Equity-only put-call ratios are telling different stories. The weighted ratio (Figure 3) continues to decline and thus remains on a buy signal. The standard ratio, however (Figure 2) is more or less moving sideways in a tight range between the parallel green lines on the chart. Hence, it’s not giving a meaningful signal currently.
Breadth had a few bad days a week or so ago, but has recovered recently. As a result, the breadth oscillators briefly fell into “sell signal” territory, but have bounced right back out of it. This is our shortest-term indicator and is sometimes subject to whipsaws like this especially in a volatile market.
$VIX didn’t get too excited about the tariff news. It briefly crossed above 20, but only for a few minutes. As a result, the most recent “spike peak” buy signal remains in place. It would be stopped out by a $VIX close above 22.51. Otherwise, that signal “expires” after 22 trading days.
$VIX has been criss-crossing its 200-day Moving Average for the past several months, and is currently slightly below it. The 20- day Moving Average is above the 200-day MA at this time, so there is no trend of $VIX buy signal currently.
We are not carrying a core position at this time because $SPX is within a trading range. We will take positions based on individual indicator signals, though, and we continue to recommend that deeply in-the-money options are rolled.
