S&P 500 Shows Strength Amid Mixed Signals from the VIX
The S&P 500 Index (SPX) continues to exhibit remarkable resilience, consistently reaching new all-time highs. As the market pushes forward, there are ongoing discussions surrounding key levels of support and resistance, with notable trends in other stocks and sectors providing insights into the broader market landscape.
S&P 500 Performance and Technical Indicators
The SPX has established a robust support zone between 5,670 and 5,770. Currently, there is no formal resistance to hinder upward movement, although market watchers typically analyze the +4σ “modified Bollinger Band” (mBB) as a target. As it stands, this band is on the rise and is now hovering near 5,900
Adding to the bullish sentiment, the McMillan Volatility Band (MVB) buy signal issued in early August remains intact, further indicating a target aligned with the +4σ Band. The ongoing decline in the equity-only put-call ratios, despite a slowdown in their rate of descent in recent days, continues to shine a positive light on stock performance. As long as these ratios remain on a downward trend, it suggests bullish sentiment among investors.
Market breadth has seen improvement this week, with breadth oscillators now signaling buy conditions, although they reside in a slightly overbought territory. This recent uptick effectively negates the potential sell signal that seemed imminent just a week prior. Notably, cumulative volume breadth (CVB) achieved new all-time highs alongside the SPX on two separate occasions this week, providing strong reassurance about the current market rally. Furthermore, new highs are outpacing new lows on the NYSE, with the latter dipping to single digits—further reinforcing a bullish interpretation of the market’s trajectory.
VIX Signals: A Mixed Bag
Despite the optimistic outlook for the SPX, the VIX (Volatility Index) is sending mixed signals that require careful consideration. A notable “spike peak” buy signal remains in effect, which will continue for the next 22 trading days or until the VIX closes above 23.14, whichever occurs first. However, concurrently, there exists a trend of VIX sell signals, which will remain intact unless the VIX closes beneath its 200-day moving average (MA) currently resting at 15.30. This MA has shown signs of rising consistently.
Despite these mixed signals, the broader construct of volatility derivatives suggests a predominantly bullish landscape for stocks. The term structures tilt upward in the majority of scenarios, save for what can be termed the “election bump.” This phenomenon relates to the heightened costs of SPX options that expire shortly after the upcoming November elections—now a mere three weeks away.
Stocks to Watch
As the S&P 500 captivates eyes with its continual ascent, other stocks are also drawing attention. Among them are:
- Amphenol – Known for its electrical and fiber optics connectivity solutions, Amphenol has seen positive chart patterns, indicating potential for further gains.
- APA Corporation – The energy giant has also shown bullish momentum, following favorable fluctuations in oil and gas markets.
- Wheat – With agricultural markets receiving focus amid ongoing global supply chain adjustments, wheat has been highlighted in the current trading landscape.
- Walgreens – The pharmacy and retail giant is gradually gaining back momentum after prior setbacks, emphasizing the significance of steady consumer demand.
Conclusion
While the S&P 500 continues to climb and showcase technical indicators that support this upward progression, it is essential to keep a vigilant eye on the VIX’s mixed signals. Traders and investors alike are encouraged to assess not only the robust performances from the SPX but also the broader array of stocks closely tied to market dynamics. By closely monitoring these market indicators and sector movements, stakeholders can position themselves effectively in the face of current and future challenges within the trading landscape.