Weekly Market Commentary

I guess politicians don’t understand that the end of the year is supposed
to be a time of holiday celebration and little market movement.

Amazingly, this sharp decline today may not actually change the

technical picture much — unless the decline gets worse.

$SPX closed Thursday at 1443.60, with the 20-day moving
average at 1420. The 1420 level is also a support level (~1428 mid-day Friday),

extending back to October.

Meanwhile, the equity-only put-call charts continue to remain
strongly on buy signals.

Market breadth has been quite strong on recent days. Even on
Wednesday, when the broad stock market declined, breadth was about
flat. Both breadth indicators remain on buy signals.

Volatility indices ($VIX and $VXO) have been perhaps the
closest thing to a bearish indicator of late. $VIX rose sharply over the
past couple of days, in fear (apparently, correctly) of problems
emanating out of Washington, D.C. A $VIX close above 19 would be

an outright bearish signal. That might be possible today (~18.65 mid-day).

In summary, the bulls will be put to the test today, but there is
good reason to suspect that they might pass that test. The indicators
are still bullish, and one down day probably isn’t going to change that.
We will maintain our bullish outlook as long as $SPX continues to
close above 1420.

Larry McMillan