Heavy put buying is a cautionary sign. Are the bears about to take control?
The S&P 500 Index (SPX) SPX continues to be subject to large intraday volatility. The U.S. benchmark index is showing resistance at 7,460 (the top of the gap), in addition to the resistance at 7,530 and 7,600-7,620. There is support at around 7,350 (the lows of the last two trading days), and stronger support in the 7,250-7,275 zone. The SPX chart has both a lower high and a higher low this month - a triangle pattern than can often lead to explosive breakouts. If implied volatility decreases, this might eventually be a good spot for a straddle buy on SPX.
Equity-only put-call ratios continue to rise. There has been fairly heavy put buying almost every day, so these ratios remain on sell signals for stocks.
Market breadth has been positive (again, NYSE breadth was better than "stocks only" breadth), but the difference was small. So, the two breadth oscillators remain at odds with each other as the NYSE breadth oscillator is on a buy signal while the "stocks only" is on a sell.
On the NYSE, new 52-week highs outpaced new lows and numbered more than 100 again, so this buy signal is still in place - narrowly averting being stopped out. It will remain so until new lows outnumber new highs on the NYSE for two consecutive days.
VIX VIX hovered just below 19 at the end of the trading day on Thursday - enough to keep the trend of VIX buy signal for stocks intact. That buy signal will be stopped out if VIX closes above 19 for two consecutive days. In addition, the "spike peak" buy signal is also still working.
The construct of volatility derivatives remains bullish for stocks as well.
Investors are facing a mixed set of indicators and a SPX chart in a consolidating formation. We will act on the indicators as our trading systems dictate. Meanwhile, continue to roll deeply in-the-money options.
New recommendation: Varonis Systems $(VRNS)$
Option volume in Varonis Systems (VRNS) rose sharply this week on news that the company received takeover interest from private-equity firms Blackstone (BX), Thoma Bravo and Vista Equity, according to Bloomberg. Stock volume patterns are extremely strong; this is interesting enough to warrant a speculative long call position:
Buy 2 VRNS (July 17) 35 calls in line with the market.
We will hold without a stop initially, thus risking the entire call premium.
New recommendation: Allegion PLC (ALLE)
There has been a new weighted put-call ratio buy signal in Allegion (ALLE). The stock had been in a downtrend since January, and pessimism had built up over that time. Investor pessimism seemed to peak in April, but that buy signal didn't work out (see the chart below). There's now a new buy signal at an even more pessimistic level. On the chart, this buy signal is occurring at a level of close to 300 on the Y-axis. That means that almost $300 is being spent on puts for every $100 spent on calls.
Buy 2 ALLE (July 17) 140 calls in line with the market.
We will hold these calls as long as the weighted put-call ratio for ALLE remains on a buy signal.
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 a roll-up in the case of a call bull spread or a 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 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 $(MHK)$(July 17) 105 calls: we will hold these calls as long as the weighted put-call ratio of MHK remains on a buy signal.
Long 1 BNS $(BNS)$ (Sept. 18) 85 call: Use a trailing closing stop at $83 for these calls.
Long 2 RTX $(RTX)$ (July 17) 195 calls: We will hold as long as the weighted put-call ratio for RTX remains on a buy signal.
Long 2 IR $(IR)$ (July 17) 80 calls: We will hold as long as the weighted put-call ratio for IR remains on a buy signal.
Long 8 CLOV $(CLOV)$ (July 10) 4.5 calls: Stop out if CLOV closes below $4.
Long 1 SPY (July 17) 757 call and short 1 SPY (July 17) 782 call: The position will be held until new lows outnumber new highs on the NYSE for two consecutive days.
SPCX $(SPCX)$ butterfly: long 3 SPCX (July 17) 250 call; short 2 SPCX (July 17) 300 calls; long 1 SPCX (July 17) 335 call.
Long 1 SPY (July 17) 740 call and short 1 SPY (July 17) 760 call: This is the trend of VIX buy signal. Stop out if VIX closes above 19 for two days in a row.
Send questions to: lmcmillan@optionstrategist.com.
Lawrence G. McMillan is president of McMillan Analysis, a registered investment and commodity trading adviser. 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 adviser and with the CFTC as a commodity trading adviser. 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
June 26, 2026 07:23 ET (11:23 GMT)
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