MW Don't rule out a 'June swoon' - the S&P 500 is pushing its limits
By Lawrence G. McMillan
Even upbeat Oracle earnings next week might not be enough to rally the market
This leg of the bull market is looking tired.
Some potentially volatile earning reports land next week, led by Oracle $(ORCL)$, which had a 35% move after earnings three quarters ago. Additionally, Chewy $(CHWY)$ and RH $(RH)$ have also been big movers after reporting earnings. Adobe's reporting history $(ADBE)$ is also worth noting.
As an example, look at Oracle's two-year stock chart below, and the two graphs. The bottom line is the stock price and the top line is implied volatility. The picture shows implied volatility increasing into a spike and then plunging, creating a sawtooth pattern.
Such implied volatility increases occur as the earnings date approaches. Then implied volatility plunges after the earnings are announced. It is actually something of an optical illusion, for the options are not getting more expensive in terms of price as the earnings date approaches, but they are remaining the same price. That is, the option-trading "universe" prices the straddle prior to the earnings and more or less keeps it at that price until the earnings are announced. An option that doesn't lose value to time decay (which these don't over the couple of weeks heading into the earnings) thus has the appearance of increasing implied volatility. So, every week when we publish the list of potential post-earnings moves, the stocks show this sawtooth pattern surrounding past earnings dates.
The table below spotlights the four stocks mentioned earler, which are reporting earnings next week. This list normally is comprised of stocks whose options have increased implied volatility. That is, the option market is expecting a potentially volatile move after the earnings news.
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 the stocks listed in this table, that would mean buying the straddles expiring on June 12, or the next nearest date if that expiration date not exist for a particular stock.
Specifically, the columns below (from left to right) are:
Date: The earnings reporting date.
A.M./P.M.: Whether the earnings are to be reported before the market opens ("A.M.") or after the market closes ("P.M.").
Symbol: The stock symbol.
Needed: The most that we would pay for that near-term straddle, with the price of the straddle expressed as a percentage of the underlying stock price. In reality, this is the percentage move that is smaller than six of the past 10 post-earnings moves in this stock.
OptVol: The 20-day average of total option volume on this stock. Low numbers here indicate a potentially illiquid situation.
Date A.M./P.M. Symbol Needed OptVol 6/10/2026 A.M. CHWY 10.25% 14,295 6/10/2026 P.M. ORCL 11.43% 287,555 6/11/2026 P.M. ADBE 7.58% 37,485 6/11/2026 P.M. RH 16.95% 2,396
Currently, ADBE (Jun 12) at-the-money (255) straddle is selling for about 7% of the stock price, slightly below the "Needed" number in the table above (7.58%). But prices do change prior to the actual earnings announcement. All items in the table should be checked just before the earnings are announced, for that would be the time to buy the straddles or strangles if they do satisfy the "needed" requirement.
New recommendation: RTX Corp.
There is a weighted put-call ratio buy signal for RTX $(RTX)$. It comes at about the same level a recommendation a year ago, which set off a long rally. As for the stock chart itself, RTX has been building a base between $172 and $180 and if it can break out above 180, then that would be a bullish move.
If RTX closes above $180, then buy 2 RTX (June 18) 180 calls in line with the market.
If these calls are bought, we will hold as long as the weighted put-call ratio for RTX remains on a buy signal.
Stock market is on thin ice
The S&P 500 Index SPX has reached an extremely overbought state, but the bull market remains intact. There still aren't many confirmed sell signals from our indicators. After closing higher for nine days in a row, the index finally had a down day this week, and market internals were fairly negative as well. That's to be expected in an overbought market, and it could lead to some confirmed sell signals soon - but not yet. The first support level for SPX is 7,500-7,520 and then 7,330 below that, with 7,000 being the ultimate strong support level. The McMillan volatility band (MVB) sell signal remains in effect and is still our only confirmed sell signal from our indicators at this point.
Equity-only put-call ratios continue to drop, reflecting fairly heavy call volume vs. put volume. These ratios remain on buy signals for the stock market even though they are in overbought territory. They will only generate sell signals when they roll over and begin to rise.
Market breadth is poor and breadth oscillators are on the brink of sell signals. Similarly, new 52-week lows exceeded new highs on the New York Stock Exchange by one issue on June 3. Still, that is a negative, and if new lows are dominant again today, that will stop out the current buy signal from this indicator. It won't generate a sell signal but could be a return to a neutral status.
On a more positive note, the Cboe Volatility Index VIX didn't react much to yesterday's selling in SPX. It is still near 16, and as a result the trend of VIX buy signal for the stock market remains intact (circled area on the accompanying VIX chart). The construct of volatility derivatives remains bullish too, as the VIX futures term structure slopes upward, and the VIX futures are trading at a relatively large premium to VIX.
The SPX and VIX charts remain positive, but some negative signals could be confirmed from a couple of the internal indicators. We will act on a confirmed sell signal but expect only a modest pullback within an ongoing bullish trend.
New recommendation: Ingersoll Rand
A new weighted put-call ratio buy signal has been issued here. The chart shows the stock responding well to put-call ratio buy signals at similar levels over the past year. On that chart, 300 on the Y-axis means that $300 of puts are trading for every $100 of calls. That is a highly pessimistic reading, and since this is a contrary indicator, it's a buy signal for Ingersoll Rand (IR). The stock itself is building a base but needs to close above $73 in order to confirm an upside breakout from that base.
If IR closes above $73, then buy 2 IR (July 17) 70 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 TSEM (June 5) 295 call and short 1 TSEM (June 5) 320 call. The position has been rolled up many times. Going forward, roll up - 25 points on each side - if TSEM $(TSEM)$ trades at $320 or higher.
Long 1 BKR $(BKR)$ (July 17) 65 call and long 1 BKR (July 17) 60 put: Roll the call up at 75 and roll the put down at 50.
Long 2 MHK (June 18) 105 calls. We will hold these calls as long as the weighted put-call ratio of MHK $(MHK)$ remains on a buy signal.
Long 1 BNS (Sept. 18) 75 straddle: Roll the calls up to the 85 strike if BNS $(BNS)$ trades at $85. Similarly, roll the puts down to the 65 strike if BNS trades at $65.
Long 2 USO USO (June 18) 100 puts and short 2 USO (June 18) 90 puts: Continue to hold without a stop for now.
Long 0 SATL $(SATL)$ (June 18) 8 calls: The calls were stopped out on June 3 when the stock closed below $8.50.
Long 5 DGXX $(DGXX)$ (June 18) 7 calls: The trailing closing stop is 6.30 for these calls.
Long 1 SPY (June 26) 740 put and short 1 SPY (June 26) 700 put: Sell this position now, since the ratios have fallen back to new relative lows.
Long 1 SPY (July 17) 752 call and short 1 SPY (July 17) 777 call: We will hold this position until new lows exceed new highs on the NYSE for two consecutive days. Roll both sides up 25 points if SPY trades at the higher strike.
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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June 04, 2026 17:01 ET (21:01 GMT)
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