When SPX is at all-time highs, there is no formal overhead resistance, but the "modified Bollinger bands" (mBB) can be useful. Currently, SPX is trading above the +4<SIGMA> band, which is an overbought condition, but not necessarily a sell signal. If SPX closes below the +3<SIGMA> band, that would generate what we call a "classic" mBB sell signal. We don't trade those, for they have proven to be too subject to whipsaws. However, if there is further downside action after the "classic" sell signal is generated, then a McMillan volatility band (MVB) sell signal could be generated. There is no guarantee that current market conditions will actually lead to an MVB sell signal.
Equity-only put-call ratios have continued to fall. That is bullish for stocks, and as long as these ratios are declining, stocks can advance. The fact that they are making new relative lows on their charts is something of an overbought condition, but it won't be a sell signal unless these ratios reverse upward and begin to trend higher.
Breadth has been strong for a while now, and both breadth oscillators remain on buy signals. They're also in overbought territory, but when the SPX index is making all-time highs, it is a positive thing to see the breadth oscillators become overbought. That indicates that there is broad market participation in the rally. Cumulative volume breadth (CVB) continues to make new all-time highs, both in "stocks only" terms and in terms of NYSE data. That is strong confirmation of the new highs being made by SPX.
New 52-week highs on the NYSE have continued to outnumber new lows, so this indicator - which only recently generated a buy signal - remains positive. This buy signal would be stopped out if new lows were to outnumber new highs for two consecutive days on the NYSE.
Realized volatility has continued to fall, and the 20-day historical volatility of SPX (HV20) is down to 10%. That is not yet in a danger zone. It would have to fall to 8% or less to flash some warning signs.
VIX VIX has continued to remain subdued, even during most negative news flashes. So that means that both buy signals related to VIX are still in place: the "spike peak" buy signal of June 24, and the trend of VIX buy signal of June 4 (both are marked on the right-hand side of the accompanying VIX chart). These will remain in place as long as VIX remains below its 200-day moving average.
VIX stock chart with marked highs and lows.
The construct of volatility derivatives has retained its positive outlook on the stock market as well. The term structures of the VIX futures are sloping much more steeply upward now (especially in the front end). The same can be said of the Cboe volatility indices. Moreover, the VIX futures are trading at a healthy premium to VIX - another positive sign for stocks.
In summary, we're bullish on the stock market, with SPX making all-time highs and almost every one of our internal indicators on buy signals. However, we take note of the various overbought conditions and will be acting on any sell signals that might be confirmed. "Overbought does not mean sell" is our motto, so we will not attempt to anticipate sell signals merely because there are overbought conditions. The market can remain overbought for a long time. In any case, continue to roll deeply in-the-money calls upward.
New recommendation: Apple (AAPL)
There is a new weighted put-call ratio buy signal in Apple (AAPL). AAPL options are somewhat expensive right now, so we are recommending a call bull-spread instead of an outright call purchase.
Buy 2 AAPL (Aug. 15) 210 calls and Sell 2 AAPL (Aug. 15) 230 calls in line with the market.
As usual, we will hold this spread as long as the weighted put-call ratio of AAPL remains on a buy signal.
Next week, the largest U.S. banks - Goldman Sachs Group (GS), JPMorgan Chase (JPM), Citigroup (C), Wells Fargo (WFC) and Morgan Stanley (MS) - will report earnings. Although these banks are covered by a large number of analysts, sometimes the options market will give us a clue as to what, if any, earnings surprises might be in store.
Let's starting with GS. It is due to report earnings on Wednesday, July 16, before the market opens. The "best" options estimate of what the earnings hold in store is the price of the near-term straddle.
At the close on Wednesday, July 9, the GS (July 18) 697.5 straddle was trading at 29, with the stock trading at 697. The straddle cost 4.16% of the stock price. In other words, options traders "predict" that GS will move 4.16% on next week's earnings announcement, but the straddle does not give any indication of whether that move will be higher or lower.
How does this compare with recent postearnings actual moves? The following table shows the one-day moves in GS after each of the previous 10 earnings reports.
Table 1: GS recent moves, postearnings
Just two of those moves exceed 4.16% (either plus or minus), so it doesn't appear that the straddle buy would be a good idea. I wouldn't necessarily say that the straddle should be sold, though, for that could entail a large risk.
Perhaps we can gain a clue as to which direction the stock is likely to move. That can sometimes be seen in the options trading as well, if we look at the percent of calls traded versus total options volume on the stock. A distortion in that percentage as earnings approach can be useful.
In the case of Goldman, let's look at last quarter, when earnings were reported on April 14. The following table shows the 15 days leading up to the earnings, ending with Friday, April 11. The percentage of total options volume in GS that was call options is shown in this table.
Table 2: GS call volume prior to first-quarter 2025 earnings
You can see that the percentage of call volume increased steadily heading into the earnings. In fact, it turned out that earnings were slightly better than expected, and GS rose 1.92% (previous table) on the day after the earnings - or about 9 points.
So, that data may have some usefulness. Let's look at what this quarter is showing.
Table 3: GS call volume prior to second-quarter 2025 earnings
There are still a few more trading days until GS earnings are reported next week on June 16, but the pattern recently has seen the percentage of calls decreasing (or the percentage of puts increasing, if you prefer). That would indicate a slight bias to the downside - or that earnings might be a slight miss. But this isn't really a very large change in the percentage of calls, so it's not likely to be worth a trade.
We ran the same numbers for the other four big bank stocks mentioned. First, below is a table that shows the current near-term, at-the-money straddle price for each stock. The data for GS is repeated, for reference. In addition, the table shows how many times in the last 10 earnings reports the one-day move after the earnings exceeded the straddle price shown in the table. One can see that, overall, the current straddles are somewhat expensive and would not be good buys for this quarter's earnings reports.
Table 4: Straddle price vs. recent postearnings moves for all 5 big bank stocks
So, the next step is to see if the percentage of options volume that is calls gives us any clues. As with GS above, let's look at last quarter to see how things worked out. The following table shows the percentage of calls traded for each of these stocks, for the 15 days leading up to earnings. The GS data is repeated from Table 2, for reference. At the bottom of the table, the stock moves on the day after the earnings were reported is also shown.
Table 5: Percentage of call volume prior to first-quarter 2025 earnings reports
The GS column shows that the percentage of call volume was increasing going into the first-quarter earnings report, and the stock rose 1.92%. JPM had a similar increase in call volume prior to the earnings, and the stock was up 4.0% - a strong move. In fact, all of the stocks showed an increase in the percentage of calls. All but Wells Fargo (WFC) were higher.
So, those results are good enough that it's worth looking at the same data for this quarter.
Table 6: Percentage of call volume heading into second-quarter 2025 earnings
In the above table, the date in the first column allows for the fact that earnings are not being reported until next week. But there are some rather startling results. First, both JPM and C show a distinct decrease in percentage of calls over the past 10 trading days (and thus a distinct increase in the percentage of puts traded). That would bode unfavorably for the next earnings report for both companies, unless that percentage improves over the remaining days prior to this quarter's earnings report. Only WFC shows a material increase in percentage of call volume, so it may fare better.
So, I'd say if you want to speculate on these earnings reports, buy a few puts on JPM and C, and buy a few calls on WFC. I wouldn't buy straddles on any of them - they seem too expensive right now.
New recommendation: Docusign (DOCU)
A new weighted put-call ratio buy signal has arisen in DocuSign (DOCU), which is attempting to recover from its most recent negative earnings report. A share-price move above $80 would be positive confirmation of this buy signal.
Conditional call buy in DOCU: If DOCU closes above $80, then buy 3 DOCU (Aug. 15) 80 calls in line with the market.
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.
Also, for outright long options, roll if they become 8 points in-the-money.
Long 2 APH $(APH)$ (July 18) 95 calls: The closing stop remains at 94. Roll up at 105.
Long 1 TSEM $(TSEM)$ (July 18) 42 call: Roll up the calls at 50.
Long 1 SPY SPY (Sept. 19) 585 call and short 1 SPY (Sept. 19) 635 call: This is the position based on the differential between implied and historical volatility. Raise the trailing stop; stop out if SPY closes below 612.
Long 2 SPY (July 18) 621 calls: This position was bought in line with the cumulative volume breadth (CVB) buy signal. That signal is still in effect. CVB made a new all-time high on several recent days, the latest of which was July 9. The target was for SPY to eventually make an all-time high, which it has done. Hold with a trailing, closing stop at 612.
Long 6 DOUG $(DOUG)$ (July 18) 2.5 calls: We will hold without a stop while the takeover rumors play out.
Long 1 SPY (July 18) 601 call and short 1 SPY (July 18) 621 call: This position is the trend of VIX buy signal. Stop out if VIX closes above 21.0 for two consecutive days.
Long 4 BKR (July 18) 39 calls: We will hold these calls as long as the weighted put-call ratio for BKR $(BKR)$ remains on a buy signal.
Long 1 SPY (Aug. 1) 610 call and short 1 SPY (Aug. 1) 630 call: This is the "spike peak" buy signal of June 24. Stop out if VIX closes above 22.51. Otherwise, we will hold for 22 trading days.
Long 5 SVXY SVXY (July 18) 42.5 calls: We monitor the weighted VIX futures premium via a proprietary calculation. Specifically, the calculation is currently at 2.74. This trade would be stopped out if it drops to 0.50 or lower. We will update the calculation weekly.
Long 4 CORZ (July 18) 17 calls: Core Scientific (CORZ) announced it had signed a definitive agreement under which CoreWeave (CRWV) will acquire CORZ in an all-stock deal. Under the terms of the agreement, CORZ shareholders will receive 0.1235 of CRWV common stock (fixed exchange ratio). The share price of CORZ declined in response as investors were disappointed by the all-stock deal and the absence of a collar or cash component, given the volatility of CRWV common stock. That seems to me to be an overreaction. The transaction is expected to be completed in the fourth quarter of 2025, so the carrying costs are small in comparison with the huge spread. Admittedly, there is difficulty in borrowing CRWV stock, so that does contribute to a wider spread. Continue to hold for now.
Long 1 SPY (Aug. 29) 625 call and short 1 SPY (Aug. 29) 645 call: We will hold until new lows outnumber new highs on two consecutive days on the NYSE.
All stops are mental closing stops unless otherwise noted.
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