Weekly Market Commentary 6.27.14

There is support for $SPX at or just below 1950. In addition, there is support at 1925 (the lows from a couple of weeks ago), and then there is major support at 1900.

6 27 spxThe one deteriorating area among our main indicators is the equity-only put-call ratios.  Both have started to rise over the past three days, and the weighted ratio is now officially on a sell signal.

6 27 pc21_w
Market breadth (advances minus declines) remains bullish. The week’s decline brought the breadth indicators lower, but they still remain on buy signals at this time.

Volatility indices ($VXST, $VIX, and $VXV) remain low and misunderstood by most.  The average media person reports that low $VIX means traders are complacent and thus warns of the danger for the stock market. In reality, $VIX is quite a bit higher than realized
20-day stock market volatility, so in that sense it is not cheap at all. As long as volatility remains low, stock prices can rally.

6 27 vixIn summary, nearly all of the intermediate-term indicators are bullish (save the weighted put-call ratio), so the longer-term outlook is bullish. It remains to be seen whether the overbought conditions will generate any meaningful short-term correction.