Weekly Market Commentary 10.10.14

The stock market has become extremely volatile, trading up and down
hundreds of Dow Jones points in a day. But our indicators have remained steadfastly bearish throughout the last few weeks. For example, despite several big rally days, $SPX never broke the downtrend line that connects its series of lower highs. Until that downtrend is broken, the $SPX chart will be bearish.

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Equity-only put-call ratios remain on sell signals. The charts in
Figures 2 and 3 show that the ratios are racing higher now. As long as
they are trending higher, they are on sell signals.

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Market breadth has been swinging wildly back and forth. Six of the last ten days have seen +/-2000 breadth. That is quite unusual. Both breadth indicators are on sell signals, and both are in oversold territory. However, the market can
continue to decline sharply even while oversold.

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Volatility indices continue to rise, even though they have had some wide
swings, just as the stock market has. But the trend of volatility is higher,
and that is bearish.

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In summary, the intermediate-term indicators are all bearish, so
even though oversold conditions are setting up potentially strong buy
signals, do not act on these buy signals until they are actually
confirmed.