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THE OPTION STRATEGIST

FREE WEEKLY UPDATER

Stock Market Commentary 6/24/2016

By Lawrence G. McMillan

McMillan Option Mentoring

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.

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The Weekly Updater Stock Market Commentary is an abbreviated version of the commentary featured in The Option Strategist Newsletter.

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About Lawrence G. McMillan

Lawrence G. McMillanProfessional trader Lawrence G. McMillan is perhaps best known as the author of Options As a Strategic Investment, the best-selling work on stock and index options strategies, which has sold over 300,000 copies. An active trader of his own account, he also manages option-oriented accounts for separately managed accounts. In a research capacity, he edits and contributes to his firm’s publications: Daily Volume Alerts, The Option Strategist and The Daily Strategist – derivative products newsletters covering equity, index, and futures options. Finally, he speaks on option strategies at many seminars and colloquia in the United States, Canada, and Europe. He is often seen on CNBC and Bloomberg TV and is quoted in publications such as The Wall Street Journal, Barron’s, Technical Analysis of Stocks and Commodities, Data Broadcasting’s “Exchange” magazine, Futures Magazine, theStreet.com, Active Trader Magazine and many others. In 2011, Mr. McMillan received the prestigious Sullivan Award in recognition on behalf of his outstanding contributions to the growth and integrity of the U.S. options markets. In these capacities, he is the President of McMillan Analysis Corporation, which he founded in 1991.
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