Stock benchmark needs to hold 4330 as market internals deteriorate.
The stock market, as measured by the S&P 500 Index SPX, peaked near 4600 in late July and has been in a downtrend ever since. Last week, the pullback had its first test of a major support area, at 4330, and that support held quite nicely. So, by that measure, the bull market is still intact on the SPX chart. There is another support area at 4200, but it’s the one at 4330 that needs to hold in order to keep us in a “core” bullish position.
Breadth has been very poor throughout most of August, and so the breadth oscillators have remained on sell signals. They have reached deeply oversold conditions, but it would take at least two days of positive breadth to pull them out of this condition and over onto a buy signal. That has not taken place yet.
So, we are maintaining a low-delta “core” bullish position as long as SPX is above 4330, and we will trade other indicators around that.SPX has moved above its -3σ Band and thus created a “classic” modified Bollinger Band buy signal. However, for a McMillan Volatiltiy Band buy signal to occur, SPX will have to trade at 4459 or higher.And sell 1 SPY Oct call with a striking price 18 points higher.
Long 6 ORIC ORIC, -2.22% Sept 7.5 calls: The stock is strong; it made a new yearly high on Wednesday. The stop remains at 8.10.
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