These charts suggest the bears aren't done with the stock market yet

MW These charts suggest the bears aren't done with the stock market yet

By Lawrence G. McMillan

Even savvy institutional investors are wary of 'buying the dip'

The bears clearly have control of the stock market - no "buy" signals are appearing that would counter the negativity. The S&P 500's SPX decline is substantial; last week the benchmark index broke its December low, signaling further deterioration.

Lower highs and lower lows on the SPX chart is bearish, as is the fact that the shorter-term moving averages and "modified Bollinger Bands" are heading lower. There is support at the 6,500-6550 level, which encompasses the market's November lows. The 200-day moving average is around 6,610, but it's unclear if that will provide support or not. Institutional investors sometimes like to buy at that MA, but the fundamentals may be deterring them now.

Equity-only put-call ratios edged higher, and both ratios are below their peaks of last week. That means they are both on sell signals. They would have to clearly roll over and trend downward in order to generate buy signals.

Market breadth has been poor, with both breadth oscillators remaining on sell signals, in oversold territory. New lows on the NYSE have outnumbered new highs - except for one day. That means that this signal is still bearish for stocks.

VIX VIX is shooting higher, which keeps the trend of VIX sell signal in place. Even though there is an active "spike peak" buy signal, we are not trading it until the construct of volatility derivatives gives the all-clear. The VIX futures term structure is inverted, and the now front-month April futures are trading well above May by 90 cents or so. Moreover, the VIX futures are trading at discounts to VIX. The Cboe Volatility Index term structure isn't quite as bad, but still mostly flat.

Earnings slowdown

There isn't much earnings activity to note, other than Chewy (CHWY)). There could be an earnings surprises when the pets supply retailer reports next week.

Our approach is to attempt to buy the shortest-term straddle possible (generally the one expiring on the Friday after the earnings reporting date) and to exit at the close of the first full day of trading after the earnings have been reported.

For Chewy, that would mean buying the straddles expiring on March 27. Try to buy an at-the-money straddle for 10.25% of the stock price or less. The at-the-money CHWY (Mar. 27) 24 straddle recently was trading for about 14% of CHWY's stock price, so this straddle would not be a buy. However, it is often the case that straddles become a bit cheaper as the actual date approaches, so these are all worth monitoring as their earnings dates approach.

Hit the brakes on CarMax $(KMX)$

CarMax (KMX) has not yet closed below $41, where we would buy put options, so this recommendation remains in effect for another week.

KMX has support in the $41 area, so we are not going to take a bearish position unless KMX can break down below that support level. In the past, a put-call ratio sell-signal from a similar level has been profitable. These signals come when there is a buildup of speculative extreme. Currently, there has been a lot of call buying, which forced the ratio lower and now is beginning to rise. If the stock breaks support, we will take the following trade.

If KMX closes below 41, then Buy 2 KMX (Apr. 17) 42.5 puts in line with the market.

If this position is taken, then we will hold as long as the weighted put-call ratio for KMX remains on a sell signal.

H&R Block $(HRB)$ tries to rally

Shares of H&R Block (HRB) have been in a severe downtrend since last tax season ended almost a year ago. Now the stock is trying to put in a bottom, as it has formed a double bottom and is trying to break out over resistance at $32.50. Perhaps the 2026 tax season will help, although one would have thought that would be already baked into the stock price. In any case, if HRB can break out over $32.50 on a closing basis, then act on this put-call ratio buy signal.

If HRB closes above 32.50, then Buy 3 HRB (Apr. 17) 30 calls in line with the market.

New recommendation: SFL Corp. (SFL)

Option prices on SFL (SFL) are relatively cheap, especially those of intermediate-term duration. This is the kind of situation in which we like to buy straddles - buying both a put and call. Then, if the stock makes a large enough move in either direction, we can profit.

This stock has recently rallied from below $7 to above $11. That four-point move took about four months. Other four-month periods have produced similarly large moves (see the chart of SFL). Currently, the five-month straddle is priced at about $1.75. That's what makes these options relatively cheap and sets the stage for a profit if the stock continues to move.

Buy 4 SFL (Aug. 21) 10 calls and buy 4 SFL (Aug. 21) 10 puts for a straddle price of $1.75 or less.

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 (March 20) 140 call and short 1 TSEM (March 20) 155 call: Roll up and out both sides, 15 points each, to the TSEM $(TSEM)$ (April 17) 145-160 call-bull spread.

Long 0 BMO (June 18) 130 call: This call was sold when BMO $(BMO)$ closed below $140 on March 12.

Long 6 expiring AAL (March 20) 14 puts: Roll to the AAL (April 10) 10.5 puts: We will continue to hold as long as the AAL $(AAL)$ put-call ratio is on this sell signal.

Long 1 expiring LH (March 20) 280 call: The put-call ratio has rolled over to a sell signal, so let this LH $(LH)$ call expire and do not replace it.

Long 0 ERAS (March 20) 12.5 calls: These calls were stopped out on March 16, when ERAS $(ERAS)$ closed below $13.60.

Long 1 BKR (July 17) 65 call and long 1 BKR (July 17) 60 put: Roll up the BKR $(BKR)$ call at $75 and roll down the put at $50.

Long 2 ARKK (Apr. 17) 74 calls: We will hold the calls as long as the weighted put-call ratio for ARKK ARKK remains on a buy signal.

Long 2 expiring SLV (March 20) 79 calls and short 2 SLV (March 20) 94 calls: Sell these SLV SLV spreads and do not replace them.

Long Buy 2 SPY (April 17) 666 puts and short 2 SPY (April 17) 615: Use a close back above 6850 by SPX as a trailing stop.

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 the book, 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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March 19, 2026 16:12 ET (20:12 GMT)

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