'Sell' signs are showing up in the stock market - but this number matters most

Dow Jones
Oct 17

MW 'Sell' signs are showing up in the stock market - but this number matters most

By Lawrence G. McMillan

The S&P 500 can climb a 'wall of worry' - if it stays above 6,500

The S&P 500 index SPX had a violent and negative reaction to the threat of 100% tariffs on China - a "tariff tantrum" - and its aftermath is still affecting the market. Volatility is clearly much higher, so there has been some change in the marketplace. But there is strong SPX support in the 6,500 to 6,550 area, and that is the only support line I've drawn on the accompanying SPX. If 6,500 is violated, then a much more bearish scenario unfolds.

The U.S. stock market's sharp drop on Oct. 10 generated a new McMillan volatility band (MVB) sell signal (marked with a green "S" on the chart). That market drop also increased realized volatility, so the bands have spread wide apart - meaning that the MVB signal will likely not be hitting either of its +/-4<SIGMA> bands anytime soon.

Equity-only put-call ratios are now in a mixed state. The market selloff caused both ratios to rise a bit. But the standard ratio is now making new lows and so it remains on a buy signal. The weighted ratio has risen and has not fallen back to new lows, so it is on a sell signal. I would prefer that these two ratios are in agreement before taking a trade based on them. The computer analysis programs rate both ratios as being on sell signals; I prefer to wait for visual confirmation from the standard ratio.

Market breadth had been poor heading into the Oct. 10 decline, and that sent both breadth oscillators plunging into deeply oversold territory. This week, conditions have improved, with breadth registering three straight positive days. That has been enough to generate buy signals from both breadth oscillators, and those have been confirmed with two-day closes.

Cumulative volume breadth (CVB) has recovered quickly and has made all-time highs on each of the last two days. This is in "stocks only" terms. It is a little bit disconcerting that the NYSE-based CVB has not made a new high. In any case, this is a positive sign for SPX, since when CVB makes a new all-time high, SPX normally follows to a new high of its own.

New lows did outnumber new highs on Oct. 10, but not on any other day. So, this indicator continues to remain on the buy signal that was first generated last June. It would take two consecutive days on which new lows outnumber new highs on the NYSE in order to stop out this buy signal.

Realized volatility, in the form of the 20-day historical volatility of SPX (HV20) exploded this week, with the violent downside-upside action. HV20 had been as low as 6%, and it jumped to 13% this week. An increase in volatility is generally not good for stocks, so this is a new sell signal.

Implied volatility VIX has jumped higher as well. VIX immediately went into "spiking" mode on Oct. 10, reaching a peak of 22.44 that day. It then fell back and closed at 19.03 on Oct. 13. That generated a new "spike peak" buy signal (green "B" on the VIX chart). The stop for the "spike peak" buy signal is a VIX close above 22.44. Otherwise, this position will be held for 22 trading days - about a calendar month.

Meanwhile, the increase in VIX has caused it to close above its 200-day moving average for two consecutive days (the second of which was Oct. 15), and so that stops out the previous trend of VIX buy signal for stocks (which had been in place since late June). This is marked with the pink notes at the bottom of the VIX chart. This doesn't generate a sell signal -that won't occur until the 20-day moving average of VIX crosses above the 200-day MA.

The construct of volatility derivatives has remained bullish throughout this past week, although some of its components have weakened a bit. The term structures of both the VIX futures and of the Cboe volatility indices have continued to slope upwards. That is bullish for stocks. However, the premium on the VIX futures has diminished greatly, and that is a more bearish development. Our weighted VIX futures premium calculation has fallen to "warning" levels. The real warning would come, though, if Oct. VIX futures began to trade at a higher price than November VIX futures. So far, that has not happened.

In summary, we are still giving this bull market the benefit of the doubt as long as SPX continues to close above 6,500. Any close below would be a big problem. Meanwhile, we are taking new signals as they occur, and those are mixed (although since the new HV20 sell signal more or less offsets the new breadth-oscillator buy signal, we are not taking a position in either one). Finally, be sure to roll deeply in-the-money options when they arise.

New recommendation: VIX "spike peak" buy signal

On Oct. 13, VIX closed more than 3.0 points below its high of Oct. 10. That confirms a new "spike peak" buy signal for the stock market.

Buy 1 SPY SPY (Nov. 21) at-the-money call and sell 1 SPY (Nov. 21) call with a striking price 20 points higher.

Stop out if VIX closes above 22.44 on any day. Otherwise, we will hold for 22 trading days.

New recommendation: Beam Global (BEEM)

This stock has a similar technical pattern to recent low-priced stocks that we've traded (ATAI, OPEN and BIF, to name a few). With Beam Global (BEEM), the options are expensive and the option markets are wide, so we're going to recommend a stock purchase. If the options become more liquid, we can always roll the stock into a long call position.

Buy 400 shares of BEEM common stock in line with the market.

Use a trailing, close stop at $2.75 for this position.

Follow-up action:

All stops are mental closing stops unless otherwise noted.

We are using a "standard" rolling procedure for our SPDR S&P 500 ETF Trust $(SPY)$ spreads: In any vertical bull or bear spread, if the underlying hits the short strike, then roll the entire spread. That would be roll up in the case of a call bull spread or roll down in the case of a bear put spread. Stay in the same expiration and keep the distance between the strikes the same unless otherwise instructed.

Also, for outright long options, roll if they become 8 points in-the-money.

Long 2 expiring APH $(APH)$ (Oct. 17) 120 calls: Roll to the APH (Nov. 21) 130 calls and begin using a trailing closing stop at 123.

Long 1 expiring TSEM $(TSEM)$ (Oct. 17) 75 call: These November calls are very expensive, so we are going to roll into a call bull spread. Sell this expiring call and also: Buy 1 TSEM (Nov. 21) 75 call and sell 1 TSEM (Nov. 21) 85 call.

Long 1 SPY (Oct. 31) 672 call and short 1 SPY (Oct. 31) 687 call: This position was the trend of VIX buy signal. It was stopped out at the close on Oct. 13, since VIX had closed above 19 for two consecutive days.

Long 5 expiring SVXY SVXY (Oct. 17) 51 calls: We monitor the weighted VIX futures premium via a proprietary calculation. Sell these calls now if you can, or let them expire, since the calculation has dropped below 0.50.

Long 1 SPY (Oct. 31) 672 call and sell 1 SPY (Oct. 10) 687 call: We will hold until new lows outnumber new highs on two consecutive days on the NYSE.

Long 4 expiring ATAI $(ATAI)$ (Oct. 17) 4 calls: roll to the ATAI (Nov. 21) 6 calls; raise the stop to 5.10.

Long 2 expiring SPLG SPLG (Oct. 17) 79 calls and long 2 SPLG (Oct. 17) 76 puts: We rolled the calls up once, but after that there was no follow-through. Sell these options if you can and do not replace them.

Long 1 GLD (Nov. 21) 370 call and short 1 GLD (Nov. 21) 385 call: When GLD GLD traded at the higher strike (370) on Oct. 8, this position was rolled up for the second time. Raise the closing, trailing stop to 368 for this spread.

Long 2 NKE Nov (21st) 72.5 puts: We will hold these as long as the weighted put-call ratio for NKE $(NKE)$ futures is on a sell signal.

Long 6 expiring BITF $(BITF)$ (Oct. 17) 3 calls: roll to the BITF (Nov. 21) 5.5 calls. Raise the trailing stop to 4.60.

Long 2 expiring FTNT $(FTNT)$Oct (17th) 80 calls: Sell these calls and do not replace them, since the put-call ratio has rolled over to a sell signal.

Long 1 expiring SPY (Oct. 17) 656 put: This position is held in line with the breadth-oscillator sell signals. Since the breadth oscillators have rolled over a buy signal, sell this put and do not replace it.

Long 1 ASTS (Nov. 21) 80 call and short 1 ASTS (Nov. 21) 100 call: ASTS $(ASTS)$ traded at 100 on Oct. 16; this position should again be rolled up 20 points on each strike. Raise the trailing closing stop to 72.

Long 10 CANE CANE (Nov. 21) 10 calls: We will hold as long as the put-call ratio for sugar futures remains on a buy signal.

Long 1 SPY (Nov. 21) 665 put and short 1 SPY (Nov. 21) 615 put: This is the position based on the MVB sell signal. It was confirmed on Oct. 13, when SPX fell below 6,680. Continue to hold until SPX touches either of the +/-4<SIGMA> bands.

Long 2 BXP (Jan. 16) 72.5 puts: We will hold this position as long as the weighted put-call ratio for BXP $(BXP)$ remains on a sell signal.

All stops are mental closing stops unless otherwise noted.

Send questions to: lmcmillan@optionstrategist.com.

Lawrence G. McMillan is president of McMillan Analysis, a registered investment and commodity trading advisor. McMillan may hold positions in securities recommended in this report, both personally and in client accounts. He is an experienced trader and money manager and is the author of "Options as a Strategic Investment." www.optionstrategist.com

(c)McMillan Analysis Corporation is registered with the SEC as an investment advisor and with the CFTC as a commodity trading advisor. The information in this newsletter has been carefully compiled from sources believed to be reliable, but accuracy and completeness are not guaranteed. The officers or directors of McMillan Analysis Corporation, or accounts managed by such persons may have positions in the securities recommended in the advisory.

-Lawrence G. McMillan

MW 'Sell' signs are showing up in the stock market - but this number matters most

By Lawrence G. McMillan

The S&P 500 can climb a 'wall of worry' - if it stays above 6,500

The S&P 500 index SPX had a violent and negative reaction to the threat of 100% tariffs on China - a "tariff tantrum" - and its aftermath is still affecting the market. Volatility is clearly much higher, so there has been some change in the marketplace. But there is strong SPX support in the 6,500 to 6,550 area, and that is the only support line I've drawn on the accompanying SPX. If 6,500 is violated, then a much more bearish scenario unfolds.

The U.S. stock market's sharp drop on Oct. 10 generated a new McMillan volatility band (MVB) sell signal (marked with a green "S" on the chart). That market drop also increased realized volatility, so the bands have spread wide apart - meaning that the MVB signal will likely not be hitting either of its +/-4<SIGMA> bands anytime soon.

Equity-only put-call ratios are now in a mixed state. The market selloff caused both ratios to rise a bit. But the standard ratio is now making new lows and so it remains on a buy signal. The weighted ratio has risen and has not fallen back to new lows, so it is on a sell signal. I would prefer that these two ratios are in agreement before taking a trade based on them. The computer analysis programs rate both ratios as being on sell signals; I prefer to wait for visual confirmation from the standard ratio.

Market breadth had been poor heading into the Oct. 10 decline, and that sent both breadth oscillators plunging into deeply oversold territory. This week, conditions have improved, with breadth registering three straight positive days. That has been enough to generate buy signals from both breadth oscillators, and those have been confirmed with two-day closes.

Cumulative volume breadth (CVB) has recovered quickly and has made all-time highs on each of the last two days. This is in "stocks only" terms. It is a little bit disconcerting that the NYSE-based CVB has not made a new high. In any case, this is a positive sign for SPX, since when CVB makes a new all-time high, SPX normally follows to a new high of its own.

New lows did outnumber new highs on Oct. 10, but not on any other day. So, this indicator continues to remain on the buy signal that was first generated last June. It would take two consecutive days on which new lows outnumber new highs on the NYSE in order to stop out this buy signal.

Realized volatility, in the form of the 20-day historical volatility of SPX (HV20) exploded this week, with the violent downside-upside action. HV20 had been as low as 6%, and it jumped to 13% this week. An increase in volatility is generally not good for stocks, so this is a new sell signal.

Implied volatility VIX has jumped higher as well. VIX immediately went into "spiking" mode on Oct. 10, reaching a peak of 22.44 that day. It then fell back and closed at 19.03 on Oct. 13. That generated a new "spike peak" buy signal (green "B" on the VIX chart). The stop for the "spike peak" buy signal is a VIX close above 22.44. Otherwise, this position will be held for 22 trading days - about a calendar month.

Meanwhile, the increase in VIX has caused it to close above its 200-day moving average for two consecutive days (the second of which was Oct. 15), and so that stops out the previous trend of VIX buy signal for stocks (which had been in place since late June). This is marked with the pink notes at the bottom of the VIX chart. This doesn't generate a sell signal -that won't occur until the 20-day moving average of VIX crosses above the 200-day MA.

The construct of volatility derivatives has remained bullish throughout this past week, although some of its components have weakened a bit. The term structures of both the VIX futures and of the Cboe volatility indices have continued to slope upwards. That is bullish for stocks. However, the premium on the VIX futures has diminished greatly, and that is a more bearish development. Our weighted VIX futures premium calculation has fallen to "warning" levels. The real warning would come, though, if Oct. VIX futures began to trade at a higher price than November VIX futures. So far, that has not happened.

In summary, we are still giving this bull market the benefit of the doubt as long as SPX continues to close above 6,500. Any close below would be a big problem. Meanwhile, we are taking new signals as they occur, and those are mixed (although since the new HV20 sell signal more or less offsets the new breadth-oscillator buy signal, we are not taking a position in either one). Finally, be sure to roll deeply in-the-money options when they arise.

New recommendation: VIX "spike peak" buy signal

On Oct. 13, VIX closed more than 3.0 points below its high of Oct. 10. That confirms a new "spike peak" buy signal for the stock market.

Buy 1 SPY SPY (Nov. 21) at-the-money call and sell 1 SPY (Nov. 21) call with a striking price 20 points higher.

Stop out if VIX closes above 22.44 on any day. Otherwise, we will hold for 22 trading days.

New recommendation: Beam Global (BEEM)

This stock has a similar technical pattern to recent low-priced stocks that we've traded (ATAI, OPEN and BIF, to name a few). With Beam Global (BEEM), the options are expensive and the option markets are wide, so we're going to recommend a stock purchase. If the options become more liquid, we can always roll the stock into a long call position.

Buy 400 shares of BEEM common stock in line with the market.

Use a trailing, close stop at $2.75 for this position.

Follow-up action:

All stops are mental closing stops unless otherwise noted.

We are using a "standard" rolling procedure for our SPDR S&P 500 ETF Trust (SPY) spreads: In any vertical bull or bear spread, if the underlying hits the short strike, then roll the entire spread. That would be roll up in the case of a call bull spread or roll down in the case of a bear put spread. Stay in the same expiration and keep the distance between the strikes the same unless otherwise instructed.

Also, for outright long options, roll if they become 8 points in-the-money.

Long 2 expiring APH (APH) (Oct. 17) 120 calls: Roll to the APH (Nov. 21) 130 calls and begin using a trailing closing stop at 123.

Long 1 expiring TSEM (TSEM) (Oct. 17) 75 call: These November calls are very expensive, so we are going to roll into a call bull spread. Sell this expiring call and also: Buy 1 TSEM (Nov. 21) 75 call and sell 1 TSEM (Nov. 21) 85 call.

Long 1 SPY (Oct. 31) 672 call and short 1 SPY (Oct. 31) 687 call: This position was the trend of VIX buy signal. It was stopped out at the close on Oct. 13, since VIX had closed above 19 for two consecutive days.

Long 5 expiring SVXY SVXY (Oct. 17) 51 calls: We monitor the weighted VIX futures premium via a proprietary calculation. Sell these calls now if you can, or let them expire, since the calculation has dropped below 0.50.

Long 1 SPY (Oct. 31) 672 call and sell 1 SPY (Oct. 10) 687 call: We will hold until new lows outnumber new highs on two consecutive days on the NYSE.

Long 4 expiring ATAI (ATAI) (Oct. 17) 4 calls: roll to the ATAI (Nov. 21) 6 calls; raise the stop to 5.10.

Long 2 expiring SPLG SPLG (Oct. 17) 79 calls and long 2 SPLG (Oct. 17) 76 puts: We rolled the calls up once, but after that there was no follow-through. Sell these options if you can and do not replace them.

Long 1 GLD (Nov. 21) 370 call and short 1 GLD (Nov. 21) 385 call: When GLD GLD traded at the higher strike (370) on Oct. 8, this position was rolled up for the second time. Raise the closing, trailing stop to 368 for this spread.

Long 2 NKE Nov (21st) 72.5 puts: We will hold these as long as the weighted put-call ratio for NKE (NKE) futures is on a sell signal.

Long 6 expiring BITF (BITF) (Oct. 17) 3 calls: roll to the BITF (Nov. 21) 5.5 calls. Raise the trailing stop to 4.60.

Long 2 expiring FTNT (FTNT)Oct (17th) 80 calls: Sell these calls and do not replace them, since the put-call ratio has rolled over to a sell signal.

Long 1 expiring SPY (Oct. 17) 656 put: This position is held in line with the breadth-oscillator sell signals. Since the breadth oscillators have rolled over a buy signal, sell this put and do not replace it.

Long 1 ASTS (Nov. 21) 80 call and short 1 ASTS (Nov. 21) 100 call: ASTS (ASTS) traded at 100 on Oct. 16; this position should again be rolled up 20 points on each strike. Raise the trailing closing stop to 72.

Long 10 CANE CANE (Nov. 21) 10 calls: We will hold as long as the put-call ratio for sugar futures remains on a buy signal.

Long 1 SPY (Nov. 21) 665 put and short 1 SPY (Nov. 21) 615 put: This is the position based on the MVB sell signal. It was confirmed on Oct. 13, when SPX fell below 6,680. Continue to hold until SPX touches either of the +/-4<SIGMA> bands.

Long 2 BXP (Jan. 16) 72.5 puts: We will hold this position as long as the weighted put-call ratio for BXP (BXP) remains on a sell signal.

All stops are mental closing stops unless otherwise noted.

Send questions to: lmcmillan@optionstrategist.com.

Lawrence G. McMillan is president of McMillan Analysis, a registered investment and commodity trading advisor. McMillan may hold positions in securities recommended in this report, both personally and in client accounts. He is an experienced trader and money manager and is the author of "Options as a Strategic Investment." www.optionstrategist.com

(c)McMillan Analysis Corporation is registered with the SEC as an investment advisor and with the CFTC as a commodity trading advisor. The information in this newsletter has been carefully compiled from sources believed to be reliable, but accuracy and completeness are not guaranteed. The officers or directors of McMillan Analysis Corporation, or accounts managed by such persons may have positions in the securities recommended in the advisory.

-Lawrence G. McMillan

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October 16, 2025 14:06 ET (18:06 GMT)

MW 'Sell' signs are showing up in the stock -2-

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