The S&P 500 has tripped a cluster of sell signals from options-market indicators, according to MarketWatch columnist Lawrence G. McMillan. Equity-only put-call ratios and breadth oscillators sit on sell signals, and options are pricing outsized post-earnings moves in Meta, Microsoft and Apple as those companies report next week.
Wall Street's biggest stocks head into earnings season with the S&P 500 already breaking through main support at 7,430 on July 23, McMillan wrote. He now pegs the next support level at 7,300.
Sell signals stack up
McMillan's modified Bollinger Bands keep contracting, and his MVB sell signal points to a target just above 7,300. Overhead, he marks a new short-term resistance point at 7,525.
Other indicators lean the same way. Equity-only put-call ratios continue to rise and are back on sell signals, as traders buy puts on their stocks.
Market breadth is poor too, with both breadth oscillators on sell signals. One counterweight holds: new 52-week highs on the NYSE outnumbered new lows for a third straight day, keeping that buy signal intact.
Volatility sends a mixed message
The VIX jumped above 19 on July 23 before settling back below it. Two consecutive closes above 19 would end McMillan's run of VIX buy signals. For now the volatility term structure still leans bullish for stocks, because the front-month August futures trade well below September and the curve slopes upward at a premium to spot VIX.
Even so, traders are wary. McMillan points to Iran, interest rates and oil as forces upsetting market equilibrium, and volatility traders are watching what August could bring.
Megacaps brace for post-earnings moves
The options market is pricing sharp swings around next week's reports. Meta's near-term straddle costs 8.55% of its share price ahead of its July 29 report.
Microsoft, reporting the same day, shows a 3.92% straddle. Amazon sits at 5.55% before its July 30 print. Apple, reporting the same day, carries the lowest reading at 0.68% even as it draws the heaviest option volume on the list.
Source: MarketWatch
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