by Mahesh Kalbhor | Feb 19, 2024 | Weekly Update
In the intricate dance of the stock market, every dip, rise, and plateau tells a story. On Tuesday, February 13th, a narrative unfolded that seemed all too familiar yet distinct in its implications. The market faced a sharp downturn in two heavy waves of selling, triggered by a negative CPI report. This moment of panic, however, was short-lived. By late in the day, a reversal was in the cards as buyers stepped in, igniting a buying spree that lasted the remainder of the week. This sequence of events mirrored the sharp, one-day selloff of late January, which, in hindsight, amounted to a mere blip in the market’s upward trajectory.
In Feb 15th , the $SPX closed at a new all-time high 5048, a testament to the market’s resilience and the prevailing bullish sentiment among investors. With near-term support levels identified at 4920 and 4845—markers of the recent selloffs’ lows—the foundation seems solid. Yet, a more significant support zone lies between 4680 and 4800, promising substantial backup. A dip below 4680, however, could spell trouble, potentially flipping the $SPX chart from bullish to bearish.
Market breadth, often a telltale sign of underlying conditions, has recently shifted from caution to optimism. Despite a challenging “90% down day” on February 13th, the breadth oscillators have now edged into modestly overbought territory, nullifying any lingering sell signals. This move, albeit positive, leaves room for desire. With the $SPX scaling new heights, a more pronounced overbought condition in breadth oscillators would have been the icing on the cake.
An interesting twist in this tale is the behavior of the $VIX. Unlike the selloff in late January, the $VIX experienced a notable spike on February 13th, reaching 17.94 before settling at 15.85, above its 200-day Moving Average. This sudden jump was short-lived, however, as the $VIX plummeted to 14.38 the following day, setting the stage for a new “spike peak” buy signal.
In conclusion, the market’s ability to rebound from the February 13th selloff, paralleling the resilience shown in late January, reinforces a “core” bullish stance on the $SPX. This perspective is bolstered by the positive trajectory of the $SPX chart and the strategic trading of other confirmed signals around this core position.
Amid these market movements, option prices and implied volatility levels have seen a slight uptick, indicating a cautious stance among traders. However, the upcoming week offers a momentary pause from the hustle with markets closed on Monday to observe Presidents’ Day. This break might be a welcomed respite for traders looking to catch their breath after last week’s rollercoaster.
The economic calendar for the week ahead looks light, promising a relatively slow pace. Only a few reports are slated for release, but they include some noteworthy items. The spotlight will undoubtedly be on the Federal Reserve, with the minutes from its last meeting set to be released on Wednesday afternoon. These minutes are eagerly awaited for any hints on future monetary policy moves. Additionally, the Fed’s calendar features a couple of speaking engagements on Wednesday and Thursday, which could offer further insights into the central bank’s outlook and strategy.
As February marches on, the quarterly earnings season begins to wind down, shifting investors’ focus more towards macroeconomic indicators and policy cues.
Here’s a quick glance at the key economic events to watch:
– **Feb 20**: A day of reflection and pause as the markets close for Presidents’ Day.
– **Feb 21**: The Federal Open Market Committee (FOMC) Minutes will be in the spotlight, providing insights into the Fed’s last meeting.
– **Feb 22**: Jobless Claims and Existing Home Sales reports will offer a glimpse into the employment landscape and the housing market’s health, respectively.
As we step into a new week, let’s take the opportunity to recharge, staying prepared for whatever the markets might bring next. Wishing everyone a safe, healthy, and prosperous week ahead. Keep an eye on those economic indicators, and let’s navigate the markets with informed decisions and a steady hand.
by Mahesh Kalbhor | Feb 10, 2024 | Weekly Update
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The current market landscape paints a picture of optimism as major indices soar to new all-time highs with remarkable frequency. Among these indices, $SPX, $NDX, and the Dow stand out, affirming our steadfast “core” bullish stance. Despite the notable performance, concerns linger, notably the lagging performance of small-caps ($RUT; IWM) in keeping stride with the broader market rally. However, until these concerns materialize into definitive sell signals, they fail to sway our bullish sentiment.
$SPX finds support at 4850, with additional reinforcement at 4800. Technically, robust support rests at 4600, but a market downturn of such magnitude would undoubtedly reshape the overall market sentiment.
Market breadth remains lackluster despite the record-breaking highs of $SPX and other indices. This disparity underscores the limited bullish breadth beyond $SPX. Sell signals persist within breadth oscillators, persisting even as $SPX surpasses the 5000 mark.
$VIX maintains its low levels, yet another sign of overbought conditions. However, unless $VIX initiates an upward trajectory, its current state poses no threat to the stock market. The $VIX buy signal trend remains intact, standing firm until $VIX surpasses its 200-day Moving Average, currently at about 15.15.
Thus, our “core” bullish position endures, supplemented by prudent trades based on confirmed signals. As the market advances, we roll deeply in-the-money calls upwards, capitalizing on the upward momentum. Despite the historically negative seasonality of February, the market’s resilience remains evident. Nevertheless, should the tides turn, we stand prepared to adapt our strategy accordingly.
Once again, stocks and the market surged higher fueled by prevailing optimism, keeping sellers at bay. The S&P 500 breached the 5,000 milestone for the first time last Friday, poised to extend its gains this week. While the Dow slightly trailed behind Nasdaq and the S&P 500, the overall sentiment remains bullish, suggesting a reluctance for the market to decline. Implied volatility levels and option prices continue to decline as the market climbs.
While quarterly earnings are tapering off, the upcoming weeks will witness several retailers unveiling their performances. Economic reports on the horizon include updates on retail sales, CPI, and PPI figures. It’s crucial to allocate time for reviewing trades and refining trading strategies without excuses.
Wishing everyone a safe, healthy, and happy Valentine’s Day and week ahead! Here’s the schedule for upcoming economic reports:
– Feb 13: CPI
– Feb 15: Jobless Claims
– Feb 15: Import Price Index
– Feb 15: Retail Sales
– Feb 15: Production and Utilization
– Feb 16: Housing Starts
– Feb 16: PPI
– Feb 16: Consumer Sentiment
Here are some trade ideas this week:
– SPY: There’s no need to alter our approach when vertical debits, credits, and calendars have been performing exceptionally well. Anticipate similar trade strategies focusing on the ETF.
– NVDA: We’ve witnessed success with several bullish bull call spreads on this strong performer in recent weeks, prompting us to explore more opportunities in that direction.
– NFLX: Following its upward gap on earnings, NFLX has maintained a narrow trading range. We’ll delve into additional iron condors between support and resistance levels to capitalize on its stability.
by Mahesh Kalbhor | Feb 4, 2024 | Weekly Update
Following a robust surge to new all-time highs ) last week, $SPX encountered a setback on Wed 1/31. This was driven by disappointing earnings from notable companies like AMD, GOOG, and MSFT, alongside the conclusion of the FOMC meeting, culminating in a sharp 80-point selloff on Wednesday. Thursday saw a partial recovery, yet the market remains ensnared by news-related fluctuations. Friday brought positive earnings reports from AMZN and META (surged 20% after earnings), with an Unemployment Report signaling strength, dampening hopes of a rate cut. Despite these oscillations, the $SPX chart (all time high – 4958) maintains a bullish trajectory , finding support around 4800, extending to 4680 and some resistance if SPX crosses 5000 soon. As long as this range holds, the $SPX chart remains positive.
Technical analysis of equity-only put-call ratios suggests lingering sell signals, albeit with a neutral interpretation until a clear upward trend emerges.
Market breadth, previously robust since January 18th, briefly shifted to sell signals this week due to negative market action. Additional days of negative breadth could solidify sell signals.
Meanwhile, $VIX, despite minimal reaction to $SPX’s 80-point decline, maintains a low level, affirming the existing trend of $VIX buy signals. A low $VIX alone isn’t concerning; it’s the sharp upward spikes that pose issues.
Overall, a “core” bullish stance persists as long as the $SPX chart remains positive above 4800 
by Mahesh Kalbhor | Jan 27, 2024 | Weekly Update
On Friday, January 19th, the $SPX reached new all-time highs, both intraday and at closing. Since then, it has continued to climb, setting fresh closing records daily. Much of this surge appears driven by short covering and enthusiastic buying from previously underinvested longs. However, the market lacks the typical euphoria, as many individual stocks are struggling despite the index’s performance.
Having consolidated within the 4680-4800 range for nearly a month, $SPX should find substantial support in that zone. A close below 4680 would signal significant downside potential, although such a scenario seems improbable in the near term. Resistance levels are virtually nonexistent, given the index’s record-setting run.
Equity-only put-call ratios maintain sell signals for stocks, despite recent downward trends. Computer analysis still deems them bearish as long as they continue to rise, signaling caution for equities.
Breadth indicators improved alongside $SPX’s ascent, shifting to buy signals as the index hit new highs. They currently hover in overbought territory, reflecting positive market momentum. Additionally, the subdued $VIX further bolsters bullish sentiment, with no alarming spikes indicating potential trouble for stocks.
We maintain a core bullish stance, supported by the optimistic $SPX chart. We tactically trade confirmed signals while adjusting long call options upward as they deepen in-the-money. Although sell signals have been few and swiftly stopped out, we anticipate more to emerge should the market show signs of topping out. February historically carries risks, with 2018 and 2020 being particularly tumultuous, thus vigilance remains essential.
by Mahesh Kalbhor | Jan 20, 2024 | Weekly Update
Despite the worsening internal indicators such as put-call ratios, breadth, and New Highs vs. New Lows, the $SPX has not significantly weakened and remains close to its all-time highs. The NASDAQ-100 ($NDX) and the Dow ($DJX) have already achieved new all-time highs but face resistance at current levels. A decisive breakout above 4800 by $SPX would be highly bullish. And SPX did breakout above 4800 on 1/19/2024 (lead by AI semi conductors $NVDA $AMD etc.) almost after 2 years. Are we starting new bull market ? We shall see after 1/31/2014 FOMC meeting. Market is already pricing in 4-5 rate cuts in 2024. Support is observed just below 4700 (early January lows) with stronger support at 4600. A close below 4550 (December’s lows) would be a very negative signal, potentially signaling the start of another bear market.
Equity-only put-call ratios are on the rise, indicating a bearish outlook for stocks. They need to roll over and begin declining to turn bullish. Market breadth remains mostly poor, with breadth oscillators on sell signals and descending into deeply oversold territory, especially the “stocks only” oscillator. Despite $SPX not declining significantly, there seems to be an internal correction in the market, which could become a bullish factor when buy signals are confirmed later.
$VIX, while still subdued, has probed up to touch its declining 200-day Moving Average but quickly fell back. The trend of $VIX buy signal remains intact. A shift to “spiking” mode in $VIX could be somewhat negative for stocks, leading to sharp falls, but eventually triggering a “spike peak” buy signal.
Considering seasonality, there is a general negative trend from the 8th to the 18th trading day of January, followed by a strong positive seasonality from the 18th trading day into early February.
In summary, a “core” bullish position is maintained due to the generally positive $SPX chart, with other confirmed signals being traded around that core position.
by Mahesh Kalbhor | Jan 16, 2024 | Weekly Update
The $SPX hit new highs this week, surpassing 2024 levels. While the all-time highs were in January 2022 at 4818 (intraday) and 4796 (closing), recent numbers hover close. A two-day close above 4800 could signal the next bull market leg. Support at 4700 and stronger at 4600 exists, with a critical level at 4550. Closing below may hint at a bearish scenario. Equity-only put-call ratios rising indicate a bearish signal, affirmed by analysis programs. Breadth oscillators, echoing negative breadth, are on sell signals. Despite a low $VIX being bullish, attention remains on its trend. A “core” bullish position is held, with cautious trading around confirmed signals. 📈 #StockMarket #SPX #TradingSignals
