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Stock Market Grinding Higher...Put/Call Moves Up....

Stock-Markets / Stock Markets 2015 May 19, 2015 - 12:23 PM GMT

By: Jack_Steiman

Stock-Markets

Where's the blast? Very interesting to watch this market go through the breakout stage over 2119 in a grinding manor. This is not normal breakout behavior by any means. The short-term charts are up there, but not so much that the market couldn't forcefully move higher. The good news is it's trying to stay on breakout. The bad news is there's no power behind the move. To be honest it's not clear what this means. Maybe a simple pullback towards 2119 will help to unwind enough for a strong breakout move, but, for now, the way this is breaking out is a bit troubling. That said, it is what it is. You never argue with price, thus, I won't start now. I can wish for a better breakout scenario, but I won't argue with the price action. The market still needs to show it can hold this breakout because many breakouts of this type historically fail.


The market started with that overbought pullback early in the day, but it didn't take too long for the grind up to get under way. First, the gaps got filled. After that, we saw a bit more selling, but it became clear to the bears that they didn't have the power to keep it red, and, thus, gave up. Part of the reason for this can be found in the options market. It was really interesting to see a powerful move over 1.0 on that put-call ratio early on in the day. This coincides with the move lower in the bull-bear spread. More folks are turning a bit more bearish or at least agnostic on this market.

The inability for this market to blast out time after time when getting close has started to get on the nerves of those perpetual bulls. They have been buying hard as it gets close in anticipation of the move higher only to get hurt for the short term. They sell quickly once it fails only to see it go back up. Not fun. With this type of action taking place for months we're finally seeing more bears in the world of options. Lots of puts being bought in anticipation of a huge correction. Of course, it can still occur without warning, but the bulls have to be happy to see the put-call basically over 1.0 all day. One reading well above 1.0, so nothing bad for the bulls in terms of froth today. A well needed rest.

The market is not out of the woods since we aren't blasting up at the breakout but under no circumstances are we seeing anything bearish overall. Just some warnings but nothing has appeared yet that would force us to act in a bearish fashion or run out all of our long plays. In this insane game you play what you see and not what you fear. Fear causes the biggest mistakes. That's why I believe deeply in seeing a move and responding to it rather than always anticipating a move. It keeps you on the right side of the overall market trade more often than not. 2105 is now the first area of strong support on the S&P 500. The 20-day exponential moving average. It wouldn't be a disaster if we lose it, but it wouldn't be great to lose those twenties since that is below the breakout we just captured. A day at a time in a very difficult environment is the best advice I believe for the masses.

Peace,

Jack

Jack Steiman is author of SwingTradeOnline.com ( www.swingtradeonline.com ). Former columnist for TheStreet.com, Jack is renowned for calling major shifts in the market, including the market bottom in mid-2002 and the market top in October 2007.

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