MW These charts show the cracks in the stock market are widening
By Lawrence G. McMillan
S&P 500 technical indicators point to further weakening
The S&P 500 Index SPX is in a downtrend and has broken multiple support levels. It finally closed below its -4<SIGMA> "modified Bollinger band," which eventually set up a McMillan volatility band buy signal (green "B" on the SPX chart below).
The McMillan volatility band buy signal will remain in effect until SPX reaches either its target (the +4<SIGMA> band) or closes below its stop (the -4<SIGMA> band). SPX did not close above 6,615 - the Chandelier stop for short sales (of the SPX). There is still resistance in the 6,615-6,670 area, including the declining 20-day moving average, the 200-day moving average, and resistance from earlier in March. The SPX chart remains in a downtrend.
Equity-only put-call ratios continue to make new highs. The rate of ascent has slowed over the past two days as SPX has rallied, but these won't be on buy signals until they roll over and begin to trend lower.
On a more positive note, breadth was strong enough that both breadth oscillators are now on buy signals. Having said that, we're going to wait until next week before possibly implementing this new buy signal.
New lows still outnumber new highs on the NYSE, so this indicator remains bearish.
The trend of VIX VIX sell signal (for stocks) remains in place. The construct of volatility derivatives retains a bearish outlook for stocks as well. Until that construct improves, we won't be taking positions in line with the many VIX "spike peak" buy signals.
In summary, the S&P 500's oversold rally was sharp but appears to have ended short of the declining 20-day moving average. However, things are moving fast these days, so there could be surprises in either direction. We will take new signals as they occur, but with some caution.
New recommendation: McMillan volatility band buy signal
As noted above, a new McMillan volatility band buy signal has occurred. SPX closed below the -4<SIGMA> "modified Bollinger band" (mBB) several times, and then on March 31, it closed above the -3<SIGMA> mBB. This created a "classic" mBB buy signal, but we don't trade those. Then on April 1, SPX continued to rally, and that confirmed the MVB buy signal
Buy 1 SPY SPY (May 1) at-the-money call and Sell 1 SPY (May 1) call with a striking price 25 points higher.
This position has a target of SPX trading at the +4<SIGMA> band. It would be stopped out if SPX were to close back below the -4<SIGMA> band.
Watch H&R Block
This is a repeat recommendation from last week. HRB $(HRB)$ stock has been in a severe downtrend since last tax season ended. Recently though, the stock's chart pattern formed a double-bottom and the shares are trying to break out over resistance at $32.50. Perhaps the 2026 tax season will be of some help, although one would have thought that would be already baked into the stock price. In any case, if HRB can indeed break out over $32.50 on a closing basis, then we will 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.
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 accompanying chart of SFL). This week the five-month straddle was 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 as it has in the past.
Buy 4 SFL (Aug. 21) 10 calls and Buy 4 SFL (Aug. 21) 10 puts at 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 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 TSEM (April 17) 190 call and short 1 TSEM (April 17) 205 call: Roll up and out both sides, 15 points each, if TSEM $(TSEM)$ trades at 205.
Long 6 AAL (April 17) 10.5 puts: Sell these AAL $(AAL)$ puts now since the put-call ratio has rolled over to a buy signal.
Long 1 BKR (July 17) 65 call and long 1 BKR (July 17) 60 put: Roll the BKR $(BKR)$ call up at 75 and roll the put down at 50.
Long 2 ARKK (April 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 Buy 2 SPY (April 17) 666 puts and short 2 SPY (April 17) 615: Use a close back above 6,615 by SPX as a trailing stop.
Long 2 KMX (April 17) 42.5 puts: We will hold as long as the weighted put-call ratio for CarMax $(KMX)$ 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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(END) Dow Jones Newswires
April 02, 2026 17:43 ET (21:43 GMT)
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