The McMillan Options Strategist Weekly

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By Lawrence G. McMillan | Published 07/1/2011 | Options | Unrated

The McMillan Options Strategist Weekly

A huge stock market rally developed this week, due to a number of factors. The S&P500 Index ($SPX) entered the week in a downtrend. Depending on how you look at things, it might still be in a downtrend (see Figure 1, blue line). But it did overcome resistance at 1300 (last week's high) and 1310, so that is a positive development.

Put-call ratios have reached extreme levels, but have stubbornly been refusing to give confirmed buy signals.

Volatility indices ($VIX and $VXO) collapsed this week. That certainly changed the chart of $VIX from bearish to bullish.

Breadth indicators turned to buy signals slightly over a week ago. This week they have become quite overbought.

In summary, $SPX overcame resistance and if it can break the downtrend line in Figure 1, that would be the final confirmation that its chart has turned bullish. The weight of the technical evidence is bullish.

Lawrence G. McMillan is the author of two best selling books on options, including Options as a Strategic Investment, recognized as essential resources for any serious option trader's library.

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