MW A stock market that could only go up now seems to need direction

By Lawrence G. McMillan

The S&P 500 is likely in a trading range

The U.S. government shutdown has ended and the S&P 500 SPX has been pushing against resistance at 6,900 (the all-time highs). The first support is at 6,630, and below that is strong support at 6,500 to 6,550.

So SPX seems to be in a trading range between support and resistance. At best, it could return to a strongly bullish mode and break above 6,900 to all-time highs. A breakdown below 6,500 would be very bearish.

The S&P 500's decline last week closed two recent gaps on the SPX chart. Earlier this week, SPX gapped higher on the end-of-the-shutdown rally. That gap is circled on the SPX chart below.

The McMillan Volatility Band (MVB) sell signal remains in place, since SPX has not traded at either of the +4<SIGMA> or the -4<SIGMA> modified Bollinger bands. Note that the bands have narrowed slightly as realized volatility contracted a bit recently. That's because our volatility calculation is a 20-day historical volatility, and the big market drop on Oct. 10 is no longer within that 20-day window, so it dropped off the calculation.

Equity-only put-call ratios are still slightly negative. The standard ratio continues to rise and is solidly on the sell signal it established in mid-October. The weighted ratio has recently fallen back from a recent peak, and it could be rolling over to a "buy" signal (the question mark on the weighted chart). These ratios won't be solidly on buy signals unless they roll over and begin to steadily trend lower. Since they are already so low on their charts, that is going to be difficult.

New highs and new lows on the NYSE staged a bit of a battle this past week. A successful, four-month-long buy signal was stopped out on Oct. 31. Then, when the market broke down a week ago, new lows numbered more than 100 on both Nov. 6 and Nov. 7, creating a new sell signal. Before that could even be implemented, though, the end-of-the-shutdown rally began and the market gapped higher on Nov. 10 and Nov. 11. This two-day rally produced more than 100 new highs each day, and this indicator shifted to a new buy signal. We are going to act on it because the previous buy signal was quite successful and long-lasting.

The 20-day historical volatility of SPX (HV20) has fallen back to 12% from its peak of 17% just a week ago. While it was rising, that was bearish for stocks, but now it's only mildly elevated. If it closes below 10%, that would eliminate any lingering bearishness from this indicator.

Implied volatility - the VIX complex of indicators - has remained bullish, but just barely. VIX VIX spiked toward 23 at the worst of the selling on Nov. 7 but fell back sharply by that day's end. Because VIX never closed above its 200-day moving average for two consecutive days, the VIX-related buy signals that we had in place remained intact.

Now, the "spike peak" buy signal has reached is termination point of a 22-day holding period. Positions related to that buy signal should be sold. The trend of VIX buy signal remains in place. For a brief time, the 20-day moving average of VIX was approaching the 200-day MA, but it has fallen back now. If the 20-day MA crosses above the 200-day MA, that would be negative for the stock market (and positive for VIX).

The construct of volatility derivatives also remains bullish. The term structures are sloping upwards, and the VIX futures are trading with a healthy premium to VIX. On Nov. 7, the term structure was inverted badly in the front end and our weighted VIX futures calculation (VOLFUTA) had dropped into negative territory. But as with SPX, things had changed by day's end and the crisis was averted for now.

We have signals in both directions, which is why this might be better classified as a trading-range environment. Regardless, we will take confirmed signals as they appear and will continue to roll deeply in-the-money options.

New recommendation: New highs vs. new lows buy signal

As noted above, on the NYSE, new highs numbered more than 100 for two consecutive days. New highs also outnumbered new lows at that same time. That is a buy signal from this indicator:

Buy 1 SPY SPY (Dec. 19) at-the-money call and sell 1 SPY (Dec. 19) call with a striking price 20 points higher.

This trade would be stopped out if, on the NYSE, new lows outnumber new highs for two consecutive trading days.

New recommendation: CME Group $(CME)$

A new weighted put-call ratio buy signal has been issued by CME Group (CME). There has been a recent spate of successful buy signals here, so we are going to ride with them.

Buy 2 CME (Dec. 12) 285 calls at a price of 5.50 or lower.

Follow-up actions:

All stops are mental closing stops unless otherwise noted.

We are using a standard rolling procedure for our 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.

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

Long 2 APH $(APH)$ (Nov. 21) 130 calls: The stock continues to make new highs. The options have gotten expensive as well. We are going to roll up and out, into a call bull spread, because the options are pricey.

Sell the 130 APH calls and buy this spread: Buy 2 APH (Dec. 19) 140 calls and sell 2 APH (Dec. 19) 155 calls. Raise the trailing closing stop to 133 for these calls.

Long 1 TSEM $(TSEM)$ (Nov. 21) 105 call and short 1 TSEM (Nov. 21) 115 call: This stock continues to blast higher on the AI portion of its business. The stock traded up through $95 and then $105, so the spread was rolled up twice. There is no trailing stop at this time.

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. Continue to hold until SPX touches either of the +/-4<SIGMA> bands.

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

Long 1 SPY (Nov. 28) 685 call and short 1 SPY (Nov. 28) 700 call: This is the position based on the most recent VIX "spike peak" buy signal. The position has been held for 22 trading days, so it is time to exit - based on the trading system we designed around these spike peaks.

Long 2 BSX $(BSX)$ (Dec. 19) 100 calls: Sell these BSX calls now, because the put-call ratio has rolled over and is now rising again.

Long SPY (Nov. 28) 670 put and short 1 SPY (Nov. 28) 630 put: This position was established last week when SPX closed below support. But it was quickly stopped out for a small loss when the market rallied back, and SPX closed above 6,760.

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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November 13, 2025 12:54 ET (17:54 GMT)

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