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By Lawrence G. McMillan

Bears pushed prices lower all week, and the major trend of the $SPX chart is still downward (lower highs and lower lows, as denoted by the blue trend lines on the chart). However, most declines were halted before they got much momentum going. $SPX has found support in the general area of 3730 again, as it did at the end of June. The next support area is 3630 (the year-to-date lows). If that is violated, things could get ugly, with minor support at 3500, and then stronger support at 3200.

However, there are some short-term, oversold buy signals still in place. So resistance at 4017 (closing the gap) and 4070 could be important in that regard.

Equity-only put-call ratios continue to meander sideways above their June lows. It looks like the weighted ratio is finally rolling over to a new buy signal, but I would prefer to see visual confirmation: the breaking below those June lows. That would solidify any buy signals from this indicator.

Breadth has been negative for five days in a row, but it has not been heavily negative. As a result, the breadth oscillators finally succumbed and canceled out those buy signals. Now, on July 15th, breadth is strong again, so new breadth oscillator buy signals are likely today.

$VIX remains in a subdued state. The $VIX “spike peak” buy signals of mid-June are still in place.

Meanwhile, $VIX is back below 25 this morning, so it is making another attempt to cross below its 200-day Moving Average, which is at 24 and rising. If $VIX does cross below the 200-day MA, that will remove the sell signal that is in place from the trend of $VIX.

In summary, the “core” bearish position remains in place. The downtrend in $SPX and the uptrend in $VIX dictate that. However, oversold conditions appear on the verge of producing more short-term buy signals, which we will trade around the “core” bearish position.

This Market Commentary is an abbreviated version of the commentary featured in The Option Strategist Newsletter.


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By klmcmg