Stock Market Commentary 6/24/2016
The market remained jittery throughout the week in anticipation of the European "Brexit" vote, and the event didn't disappoint. On the heels of the decision for the United Kingdom to leave the European Union, the S&P 500 sold off tremendously Thursday night. Hence, the market is once again teetering on the important support level of $SPX 2040. Although today's price action is indeed a bit scary, from a longer term perspective the bulls remain in control so long as that support level holds.
The equity only put-call ratios both remain on buy-signals. The weighted chart has clung to its bullish position by trending sideways; however the standard ratio has begun to curl upwards, which could indicate a change in the sentiment in coming days, especially considering today’s price action.
Market breadth has been erratic as of late. Thursday was a 90% up volume day for both of the oscillators we follow, while today breadth is conversely extremely weak.
Volatility indices exploded this morning with VIX now back again above the important 17 level. The VIX futures term structure has also begun to invert, which is a bearish development for the stock market.
In summary, the "Brexit" vote has dominated the price action of market. In response, our indicators have become less bullish than they were just one week ago. Breadth remains erratic, and therefore inconclusive. The put-call ratios both remain on buys; however they are beginning to show weakness. VIX and the volatility futures are in bearish territory. Ultimately, it is price that matters, so as long as SPX remains above support, the bulls have a chance to salvage the market. If that support gives, an already ugly market could get uglier fast.