A Year to Treat Trading Breakdowns with Respect

Focus: STRATEGIES

Lawrence McMillan Image Lawrence McMillan Founder and President, McMillan Analysis Corporation

SPX is still above the major support at 2400, and that alone is enough to keep the bullish case intact. However, a breach of that support is likely to unleash a sharp correction, says technical expert and options specialist Larry McMillan.

This stock market has been able to avoid a meaningful correction for quite some time. But now S&P 500 Index (SPX) recently had a close below support at 2420, and the failed upside breakout of mid-June is looking like a big negative item on its chart, as well. 

Of course, several times in the recent past, it seemed as if SPX were about to succumb and it didn't. Can SPX pull this escape act off once again? If it can hold support at 2400, it will.

Equity-only put-call ratios remain on sell signals, as they continue to rise. The weighted ratio has been rising at a more rapid rate lately, even though stock prices were not falling much. The standard ratio isn't rising as fast, but both are making new relative highs. They are in strong bearish trends.

Both breadth oscillators are on sell signals once again. That hasn’t meant much since last November, though, because there hasn't been the opportunity to create severely oversold conditions.

Volatility has remained low (except for the one-day spike up to 15 a week or so ago). That has been a benefit to stocks. But now it appears that CBOE Volatility Index (VIX) might be establishing an uptrend.

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