The stock market, as measured by the S&P 500 Index, is struggling.
It’s been declining, for the most part, since the beginning of September. Volatility is increasing as well, which could have several negative ramifications. Yes, there was a strong rebound in the market
SPX,
from Sept. 20-23, but that rally failed very near the declining 20-day moving average (MA).
That sort of failure is what we typically see from an oversold rally in a bearish environment. So there is a lower high on the SPX chart, which defines a short-term downtrend line (declining red line on the accompanying chart). If the lows of Sept. 20 (at 4305 points) are taken out, then there will also be a lower low, and that would mean that the chart of SPX would “officially” be trending lower.
So that support at 4305 is important. As long as it holds, the bulls could still reverse the market to the upside. For the record, there is resistance at 4490 and then again at the all-time highs, 4545.
The decline on Sept. 20 was so steep that SPX closed below the -4σ “modified Bollinger Band” that day, and the next day a McMillan Volatility Band (MVB) buy signal was issued. That will remain in effect until SPX reaches either of the +/-4σ Bands. Closing below the -4σ Band would stop out the signal, and that would coincidentally occur just below the support level of 4305.
Equity-only put-call ratios remain on sell signals. The weighted ratio has been persistently rising for several weeks, while the standard ratio has only recently begun to rise. So these two ratios are back “in synch” with each other once again, and they will continue to remain bearish (for stocks) as long as they continue to rise.
Breadth continues to be an interesting market statistic. Breadth has actually been improving on a relative basis. During much of the past six months, breadth was lagging behind the surging S&P 500….
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