Weekly Market Commentary 5.9.14

The stock market continues to frustrate all but the most short-term traders.
Anyone looking for a trend to develop has not been able to find one in weeks.
Wednesday’s low at 1860 is support, as is the previous week’s low at 1850.
Below there, the April lows at 1810 are a major support level.
Resistance, however, exists all throughout the 1880-1900 area.
lm spx

Equity-only put-call ratios continue to be split.  This is quite a long time for
them to be trending in opposite directions, but it is what it is.

Market breadth has struggled to regain a bullish posture as well. After today’s
heavy afternoon selling, both breadth indicators are now on sell signals.

Volatility indices ($VXST, $VIX, $VXV) remain quite bullish,
however.  They remain at relatively low levels, and as long as that
holds, the stock market can rally.
lm vix

In summary, the indicators are mixed, and the outlook is neutral.
Admittedly, it seemed as if both the bulls and the bears had a chance
to take over this week (especially the bulls, after Wednesday’s strong
rally), but neither has been able to.  A close above 1900 would be
bullish, and a close below 1850 would be worrisome.

  • The VIX staying where it has (let’s just call it calm for simplicity) should be a position of strength for the summer. If volumes stay even while the VIX stays even, that’s a good recipe for a quiet summer rally. Perhaps not a powerful move to the upside but certainly an upward bent to the market. Good for an 8% to 10% rise if no major negative news out of China or Europe.