MW These charts show the stock market giving investors a lot to like - for now - as the S&P 500 nears 7,000
By Lawrence G. McMillan
More stocks are making new 52-week highs and volatility is low
Stock-market internal indicators are improving, so the overall picture is still positive. The S&P 500 index SPX continues to make all-time highs, and upside targets as high as 7,300 are in play.
There is support at 6,900, 6,840 and 6,720. There might be minor resistance at 6,985 (this week's highs), but another target would be the +4<SIGMA> "modified Bollinger band," which is currently at 7,030.
The only indicator on a sell signal is the equity-only put-call ratio. There are two of these measures - and the weighted ratio is more bearish as it continues to rise. The standard ratio is moving sideways after having curled upward a couple of weeks ago. As long as these ratios are moving higher, that is a bearish signal for stocks.
Market breadth has improved greatly, and both breadth oscillators are on buy signals. Furthermore, cumulative volume breadth (CVB) has made all-time highs on three recent days, as measured in both "stocks only" terms and NYSE terms. That is clear support for the all-time highs being made by SPX.
New 52-week highs on the NYSE have swamped new 52-week lows. There have been more than 200 new highs on most days over the past two weeks, and so this indicator remains strongly bullish. It would only falter if new lows were to outnumber new highs on two consecutive days.
For the most part, VIX VIX has been subdued - although it did seem to get a little "worried" this week, when SPX sold off. VIX briefly rose above 18, but then pulled back. Mostly importantly, the trend of VIX buy signal for stocks remains in place. Serious worries would arise if VIX begins to rise sharply.
The first sign of that would be if VIX were to return to "spiking" mode (a rise of at least 3.00 points over any three-day period, using closing prices). Another, more worrisome sign would be if VIX were to rise above its 200-day moving average, which is now around 19.
The construct of volatility derivatives remains bullish for stocks. The term structures slope sharply upwards, and the VIX futures are trading with a relatively large premium to VIX. January VIX futures will remain the front month until next Wednesday, when they expire.
Overall, the picture for stocks remains bullish. The indicators are almost all on buy signals, and SPX continues to press to new all-time highs. We will take new signals as they arise, and will continue to roll deeply in-the-money options.
New recommendation: Labcorp Holdings $(LH)$
A new put-call-ratio buy signal has been issued in LH (LH).
Buy 1 LH (Feb. 20) 260 call in line with the market.
We will hold the call as long as the put-call ratio for LH remains on a buy signal.
New recommendation: Erasca $(ERAS)$
Erasca shares (ERAS) broke out a week ago and the stock has been on an impressive run. There have been some rumors of a positive drug trial about to be announced, but there is no official news.
Buy 3 ERAS (Feb. 20) 7.5 calls in line with the market.
Follow-up action
All stops are mental closing stops unless otherwise noted.
We are using a standard rolling procedure for our SPY 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 1 expiring TSEM $(TSEM)$ (Jan. 16) 115 call and short 1 TSEM (Jan. 16) 130 call: Continue to hold without a stop for now. Roll to the TSEM (Feb. 20) 125-145 call bull spread.
Long 1 SPY (Jan. 29) 688 call and short 1 SPY (Jan. 23) 700 call: This position is the trend of VIX buy signal. It would be stopped out if VIX were to close above its 200-day moving average for two consecutive days.
Long 1 BMO (Jun. 18) 130 call and long 1 BMO (Jun. 18) 130 put: Continue to hold this straddle. Roll the calls up if BMO $(BMO)$ trades at $150 and roll the puts down if it trades at $110.
Long 1 SPY (Jan. 30) 690 call and short 1 SPY (Jan. 30) 710 call: This spread was bought on the upside breakout, when SPX closed above 6,920 for two consecutive days. Stop out if SPX closes below 6,840.
Long 2 expiring SPY (Jan. 16) 683 puts: Were bought in line with the breadth and equity-only put-call ratio sell signals. The breadth oscillators have rolled over to buy signals, so only the equity-only put-call ratio remains on a sell signal. So now Buy 1 SPY (Feb. 20) 683 put.
Long 6 AAL (Feb. 20) 15 puts: we will continue to hold as long as the AAL $(AAL)$ put-call ratio is on this sell signal.
Long 1 SPYM (Feb. 20) 81 call and long 1 SPYM (Feb. 20) 81 put: Roll the calls up to the 84 strike if SPYM SPYM trades at $84 or higher. Roll the puts down to the 78 strike if SPYM trades at $78 or lower.
Long 300 shares of BWEN $(BWEN)$: Stop out on a close below $2.85.
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
Disclaimer:
(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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(END) Dow Jones Newswires
January 15, 2026 16:34 ET (21:34 GMT)
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