The stock market is showing signs of a potential rally, with buy signals emerging despite the possibility of an oversold bounce. Lawrence G. McMillan, president of McMillan Analysis, highlights key indicators that suggest a bullish trend may be on the horizon.
The S&P 500 index has seen a strong week, surpassing its 20-day moving average and breaking through resistance levels. The next hurdle is reaching the all-time high near 5,260, which could signal a new bullish trend if achieved. However, if the index falls below 5,070, bears may regain control.
Various indicators, such as the McMillan Volatility Band buy signal and equity-only put-call ratios, are pointing towards a potential uptrend. Market breadth has been strong, with new highs on the NYSE dominating new lows, leading to a buy signal. Additionally, VIX has fallen sharply, indicating a positive outlook for stocks.
McMillan recommends specific trades, such as buying SPY calls and selling higher striking calls, as well as investing in Lamb Weston Holdings based on a weighted put-call ratio buy signal. These recommendations are based on the current market conditions and signals.
Overall, while there are bullish factors at play, the S&P 500 chart will only turn completely bullish with consecutive new highs. Traders are advised to stay cautious and monitor the market closely for any changes in the trend.
