MW The S&P 500 is losing the momentum that had been fueling stock investors
By Lawrence G. McMillan
Lack of follow-through to new highs is concerning but not necessarily bearish - yet
The S&P 500 SPX broke out to all-time highs twice in the past two weeks. But each time, the breakout stalled and reversed. This lack of follow-through is frustrating, but not necessarily bearish - yet. It can lead to problems, though. Look at the accompanying SPX chart. On the far left there is a blue horizontal line over the December 2024 to February 2025 portion. That's where SPX similarly was trying to make new all-time highs but could not push through. It eventually led to the very nasty correction in March and April 2025.
Currently, there is support at 6,825 (last week's lows) and 6,720 (the December lows). There is no formal resistance with SPX at all-time highs, but sometimes we use the location of the +4<SIGMA> "modified Bollinger band" in order to act as a target of sorts. That band is at 7,025 and rising.
Equity-only put-call ratios remain on sell signals. Even with SPX probing new all-time highs, there has been a large amount of put buying (mostly as protection, it seems). As long as these ratios are rising, they will remain on sell signals for the stock market. The rise is clearer on the weighted put-call ratio chart. If either of these ratios were to fall back below their lows of a couple of weeks ago, that would cancel out the sell signal.
Stock-market breadth has struggled to stay positive. The "stocks only" breadth oscillator generated a buy signal with the positive trading late in 2025 but would relinquish that status if breadth is negative again today. Meanwhile, the NYSE-based breadth oscillator has remained on a sell signal.
Cumulative volume breadth (CVB) has been more positive - as has been the case for a long time now. Both the "stocks only" and NYSE versions of CVB made new all-time highs along with SPX this week. That is normally a solid confirmation of the new highs in SPX.
New highs on the NYSE have exploded since the year began, numbering more than 200 on a couple of days. Those new highs continue to dominate new lows, so this buy signal - which originated just after Thanksgiving - remains in place.
VIX VIX has continued to trade at low levels, between 14 and 15 for the most part. A low VIX is an overbought condition, but not a sell signal. Thus, our trend of VIX buy signal (for stocks) remains in place (pink circle on the accompanying VIX chart). Trouble would appear if VIX begins to rise, but so far that has not been the case.
The construct of volatility derivatives remains bullish for stocks. Both the term structures are sloping rather steeply upward and VIX futures are trading with a larger premium to VIX.
The post-Thanksgiving seasonal period ended with the second trading day of 2026. It wasn't a stellar performance this year, and the Santa Claus rally period actually produced a tiny loss. Two more seasonal patterns appear in the remainder of January.
In summary, we are viewing the failure of SPX to be able to convincingly push through to new all-time highs with a jaundiced eye. But for now, most of the indicators are positive, so it may still be possible for SPX to break out. Meanwhile, we will trade individual signals as they occur and will continue to roll deeply in-the-money options.
New recommendation: Broad market straddle buy
When the S&P 500 is struggling to break through to all-time highs, it is often a good time to buy straddles on the broad market - especially if VIX is low, like now. The recent failure of SPX at the level of all-time highs, coupled with VIX near 15, satisfies these conditions.
You could buy straddles on SPX or SPY SPY, but we are going to recommend doing so using State Street SPDR Portfolio S&P 500 SPYM.
Buy 3 SPYM (Feb. 20) at-the-money calls and buy 3 SPYM (Feb. 20) at-the-money puts in line with the market.
Roll the calls up to the 84 strike if SPYM trades at 84 or higher. Roll the puts down to the 78 strike if SPYM trades at 78 or lower.
New recommendation: Broadwind $(BWEN)$
This is a recommendation based on technical analysis, rather than option statistics. This stock just broke out to its highest level since June 2024. Option volume and stock volume patterns are strong. One could merely buy the stock, especially since the options markets are quite thin and the markets are wide.
Buy 300 shares of BWEN (BWEN) in line with the market.
Stop out on a close below $2.85.
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 $(TSEM)$ (Jan. 16) 115 call and short 1 TSEM (Jan. 16) 130 call: Continue to hold without a stop for now. Roll up at 130.
Long 3 SLV SLV (Jan. 16) 65 calls: The weighted put-call ratio has rolled over to a sell signal, so exit this position now for a strong profit.
Long 1 GLD GLD (Jan. 16) 390 call and short 1 GLD (Jan. 16) 415 call: This put-call ratio has rolled over to a sell signal, so exit this spread now.
Long 1 expiring SPY (Jan. 9) 685 call and short 1 SPY (Jan. 9) 700 call: This position is the trend of VIX buy signal. It would be stopped out if VIX were to close above its 200-day moving average for two consecutive days. Roll to the SPY (Jan. 23) 688-700 call bull spread.
Long 1 BMO (Jun. 18) 130 call and long 1 BMO (Jun. 18) 130 put: Continue to hold this straddle. Roll the calls up if BMO $(BMO)$ trades at 150 and roll the puts down if it trades at 110.
Long 1 SPY (Jan. 30) 690 call and short 1 SPY (Jan. 30) 710 call: This spread was bought on the upside breakout, when SPX closed above 6,920 for two consecutive days. Stop yourself out if SPX closes back below 6,840.
Long 2 SPY (Jan. 16) 683 puts: Were bought in line with the breadth and equity-only put-call ratio sell signals. Both are still intact (although breadth has improved), so continue to hold.
Long 6 AAL (Feb. 20) 15 puts: We will continue to hold as long as the AAL $(AAL)$ put-call ratio is on this 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 the book, "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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January 08, 2026 16:26 ET (21:26 GMT)
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