Bulls took charge this past week with a furious rally on strong volume—what turned out to be one of the strongest 5-day periods on record. This market clearly still belongs to the bulls, and the only confirmation left is a close above 3950 to set off the next leg higher.
Equity-only put-call ratios continue to move higher, despite the broad market’s big rally. These indicators are thus on sell signals and will continue to be as long as they are rising.
Market breadth has been very strong in the past week, and both breadth oscillators are on buy signals. If the market is to continue on a new leg into all-time high territory, it is imperative that these oscillators get overbought (as they have) and stay there.
Volatility has remained one of the more bullish indicators all along. The $VIX “spike peak” buy signal of March 4th is still in effect, and the trend of $VIX is downward, and that is bullish for stocks.
In summary, since the $SPX chart is the most important indicator, if it closes above 3950, it’s an all-clear for the bulls. If that happens, $SPX would have to fall back well into the previous trading range to cancel out that bullish signal.
Lawrence G. McMillan, The Option Strategist, optionstrategist.com, 973-328-1303, March 12, 2021
Could go either Way
Up is good, so last week’s rebound in growth and continued push higher in the broad market was encouraging. That said, nothing much has changed with the overall evidence—resilience and upside from here would suggest the huge pullback earlier this month was more of a shakeout, but renewed selling pressure would hint toward another leg down. Right now, we’re playing things halfway—we’re OK with some buying, but we’re not pushing the envelope and need to see more from growth before concluding the storm has passed.
Michael Cintolo, Cabot Top Ten Trader, cabotwealth.com, 978-745-5532, March 15, 2021
Stable for Now
The passage of the $1.9 trillion COVID-19 relief bill and further relaxing of COVID-19 restrictions led to gains in the S&P 500 this week.
Economically-speaking, this week’s reports showed that attitudes are improving as they relate to the economy. Consumer Sentiment from the University of Michigan rose to the highest level in a year, while NFIB Small Business Optimism improved for the first time in five months.
The technical environment remains stable, but with key areas to watch. The Gorilla Index has been our primary focus, as it continued to break down early this week. While our Gorilla Index has yet to register a warning flag, continued underperformance by these mega-cap darlings warrants watching closely.
James Stack, InvesTech Research, www.investech.com, 800-955-8500, March 12, 2021