Weekly Commentary

On Tuesday, May 1st, $SPX traded at 1415. Now, just 7 trading days later, the entire psyche of the market has become dark and brooding.

$SPX broke down through support at 1390 last Friday. But the crucial level is support at 1340, which has held so far.

Equity-only put-call ratios remain on sell signals. This has been the most bearish indicator all throughout this decline.

Breadth oscillators rolled over to sell signals on May 3rd — a week ago. Since then they have moved into oversold territory.

For the most part, the volatility indices ($VIX and $VXO) have been bouncing around in the ranges that they had established earlier this year. For $VIX, that is the 17-21 range.

In summary, the selloff of the past seven trading days has taken a toll on the technical indicators. The 1340 level on $SPX remains important, and a close below there would warrant a bearish stance. But if that level somehow manages to hold, the bulls could once again strongly take charge.

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Larry McMillan


Professional trader Lawrence G. McMillan is perhaps best known as the author of Options As a Strategic Investment, the best-selling work on stock and index options strategies, which has sold over 300,000 copies. An active trader of his own account, he also manages option-oriented accounts for certain individuals. In a research…