By Lawrence G. McMillan
Stocks are making new all-time highs this morning, as this is being written. This includes $SPX and $NDX, but not $RUT (Russell 2000) and $DJX (The Dow). The $SPX chart remains very positive, and now we need to see if this breakout can be sustained, or if it will turn into another miserable failure, similar to what happened this past February. The internal indicators are improving, though, and this may help propel the market to substantially higher prices this time around.
There is now support in the area of 6150 (the old highs), but also at 6060, 5920-5940, and lower. Frankly, any decline below 5920 would be very negative and would once again introduce the possibility of this being a false upside breakout.
There is no formal resistance when the market is at new all-time highs, of course, but sometimes we can use the +4� “modified Bollinger Bands” (mBB) as a guideline as to where the market has reached an overbought status. The upper, +4� Band is currently at 6170 and rising. So we are fast approaching that level, but haven’t exceeded it yet.
Not all the internal indicators are bullish, though, but some are on the verge of becoming so. The equity-only put-call ratios gave sell signals nearly two weeks ago, as those ratios began to rise. However, this week they have turned back downward again. If these ratios drop below their early June lows, then the current sell signals will be canceled.
Breadth is strong today, and if that holds through the close, then the breadth oscillators will have risen far enough to once again reach overbought status, and that will stop out the previous sell signals. Moreover, it is a good thing if the breadth oscillators are overbought when $SPX is making new all-time highs.
$VIX continues to decline, and is now at its lowest levels since February. There are two buy signals operative from the $VIX chart at this time.
In summary, we have now seen $SPX fulfill our projections by reaching a new all-time high. I think there is more to come on the upside, but we will follow our indicators and trade all confirmed signals. Meanwhile be sure to roll deeply in-the-money options.
