Weekly Market Commentary 10.17.14

Stocks have had a rocky week, but some buy signals are beginning to appear.

$SPX broke down through support at 1925 this week, and immediately plunged to 1820,
which is also the area of the April lows. That is support for now.  If that should give
way, then the February lows at 1740 would be the next support area.  As for resistance,
there is plenty of overhead resistance from 1925 all the way up to 1960 and beyond.

LM 10 16 spx

Equity-only put-call ratios are racing higher every day.  Thus,
they remain on sell signals, although at their current heights, one
would have to consider them to be in oversold territory.

Market breadth has been surprising.  “Stocks only” breadth has been positive for the last
three days, including the huge down day on Wednesday.  Even so, breadth oscillators are
still on sell signals, although they are finally approaching buy signals.

Volatility indices finally exploded to the upside.  This is long
overdue, and frankly I think $VIX should be higher than it is.
The trend of $VIX remains higher, though, and that is intermediate-term
bearish for stocks.
LM 10 16 14 vix

In summary, the bulls have been wounded, but the massive oversold conditions
that were created are now generating some buy signals.  These can be powerful
buy signals, but as long as the intermediate-term indicators remain on sell signals,
the intermediate-term outlook remains bearish.