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The latter ($SPX and $VIX) are more important than the former — at least for now.
The $SPX chart remains bullish. It is still well within the rising channels (marked in blue on Figure 1) — both the wider channel (dating back to April) and the narrower one (dating back to July). The Index remains above its rising 20-day moving average.
Equity-only put-call ratios have curled upward this week, as the broad stock market has backed off somewhat. This has resulted in the computer analysis programs grading the weighted ratio as a “sell,” but not the standard.
Both breadth oscillators remain on sell signals. Typically, when $SPX is breaking out to new all-time highs, we expect to see the breadth oscillators expanding into very overbought conditions. That did not happen, and as a result, there is a distinct divergence from the breadth oscillators and the performance of $SPX.
Volatility is not divergent. In fact, it’s been steadfastly bullish for quite some time now. As long as $VIX remains below 15, it’s not a problem for stocks. We really don’t need to get more complicated than that.
In summary, for now we remain bullish in line with the $SPX and $VIX charts. However, we are certainly not ignoring the divergences.
The SPDR S&P 500 ETF Trust (SPY) closed at $290.72 on Friday, up $0.03 (+0.01%). Year-to-date, SPY has gained 9.38%.
SPY currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #1 of 150 ETFs in the Large Cap Blend ETFs category.
This article is brought to you courtesy of McMillan Analysis Corp..
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