Commentary--Lawrence McMillan for Thursday, September 21, 2000...
optionstrategist.com
Edited for ease of reading.
>>> Stock Market:
It appears that the "classic" September-October period is upon us. For a while, it appeared doubtful that we'd see the severe sort of selloff this year that we have seen in many years past. However, from what seemed like bullish period near Labor Day we now have degenerated into a very nasty situation. It will be exacerbated in the morning by the nasty Intel (INTC) earnings outlook.
S&P 500 futures traded down over 30(!) points on that news which certainly seems like an over-reaction.
As far as our indicators go, they are all pretty much on sell signals now. Bearish positions should be maintained and can even be added to, until some buy signals appear.
The selloff has become severe enough that the indicators are now moving towards oversold levels, so perhaps buy signals lie in the fairly near future, but they are certainly not here yet. Perhaps the Intel news will cause a "washout", which can eventually lead to oversold buy signals.
Our oscillator dropped below -200 tonight, thereby moving it "officially" into oversold territory. That, alone, does NOT constitute a buy signal (a buy signal will only be generated if the oscillator rises above -180).
Meanwhile, the equity-only put-call ratios are all moving higher as well, which means they are on sell signals. Eventually, they will get "too high" and generate buy signals, but that lies in the future somewhere.
It would be especially bullish if the oscillator and the equity-only put-call ratio gave more or less simultaneous buy signals and perhaps they will in the near future.
In summary, then,
...allow the market to work its way through this bearish period,
...do not anticipate any buy signals, for when the market builds up a real head of steam, it can go down faster and farther than people think,
...wait for the oscillator and equity-only buy signals.
In the meantime, tighten stops on profitable shorts or other bearish positions.<<< |
