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Stock market outlook switches to bullish as S&P 500 breaks through a barrier

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It appeared Sept. 23 that the bears had control of the stock market.

But they fumbled it badly.

Beginning with a modest oversold rally Sept. 24, the broader market has staged a strong advance — backed by some of the widest breadth in a while. Now the S&P 500 Index
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has broken out over what had been resistance around 3,425-3,430 points. That has changed the S&P 500’s chart’s designation to “bullish” (in my opinion), and the next target is the all-time highs at 3,588. A reversal back below 3,400 could alter this bullish outlook, but that doesn’t appear likely.

Equity-only put-call ratios have rolled over, and so to the naked eye, this cancels out their recent sell signals. However, they are still on “sell,” according to the computer-analysis programs that we employ. The computer is using a statistical average, and by that measurement, there are still some very low numbers coming off the 21-day moving average.

There are even lower numbers coming on right now, as call buying has been huge over the past week or so. The problem is, we are not getting “average” readings, and until we do, the sell signals should be held in abeyance.

Breadth, however, did set up buy signals. Breadth has been spectacular in this rally. First, the breadth oscillators turned to buy signals Sept. 28. Breadth had been oversold prior to that — the one area in which we did see an oversold condition. Now, those buy signals have expanded into overbought conditions. But “overbought” is a good thing when the S&P 500 is beginning a new leg higher, as it appears to be doing now.

Moreover, the cumulative advance-decline volume line has made a new all-time high. That is a very bullish indicator and forecasts that the S&P 500 will follow. For this indicator we keep a daily running sum of “volume on advancing stocks minus volume on declining stocks.”

The cumulative advance-decline line (using issues, but not volume) has also made a new all-time high. That one is not a predictive indicator, but the fact that these breadth indicators are making new all-time highs is quite amazing, given that the S&P 500 is still well below its all-time highs.

New highs are dominating new lows by a wide margin once again, so this indicator is bullish as well.

Volatility continues to live in a world of its own — largely because of the election and the expected volatility that is going to occur afterward, if the election is contested. For the record, the VIX’s
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 “spike peak” buy signal expired and so nothing is in place in that regard. On the trend of VIX, it remains slightly below its 200-day moving average (MA), and the 20-day MA of VIX also remains slightly below the 200-day MA.

Those are normally bullish signs for the stock market, but as has been noted many times, the fact that VIX is staying in the mid-20s indicates that this is not a normal time for the index.

As for the construct of volatility derivatives, it is being heavily manipulated by the post-election options as well. VIX is a 30-day volatility measure (looking forward), and for the first time, both “strips” of S&P 500 options that are necessary to calculate VIX expire post-election. That has kept VIX elevated, even though the stock market is rallying — a seeming conundrum, but not really, when you understand what is happening.

October and November VIX futures are inflated as well, because their underlying S&P 500 options expire post-election too. In fact, Nov VIX futures are more expensive than October VIX futures, and those November VIX futures are based on S&P 500 options that expire Dec. 18. So that means traders are expecting post-election volatility to continue into late this year. They might not be correct, but that’s what they’re expecting — at least according to the pricing of these post-election options.

In summary, we have enough bullish signs — primarily the breakout over 3,430 and the strong breadth readings — that we have changed our short-term outlook to bullish. As long as the S&P 500 remains above 3,400, that outlook will remain in place.



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S.E.C. Commissioner Hester Peirce on the outlook for crypto regulation, and whether this will finally be the year we see a Bitcoin ETF.





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My husband doesn’t get along with my son. I brought most of the wealth into our marriage. How do I split my estate?

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Dear Quentin,

How do couples typically handle their estates in a second marriage? My husband and I have been married for seven years, and it is the second marriage for both of us. I have one adult child from my previous marriage; he has no children.

I brought the majority of our wealth to our marriage, including almost $1 million in my 401(k) and a nice home that is almost paid off; otherwise, we have no debt. My husband and I bought a second home together. We work hard to fund our new 401(k)s, and own a successful business together.

I am turning 65 this year, so estate planning is long overdue. My husband is five years younger than me, and we are both in very good health. We have two issues facing us: I see our retirement as living very comfortably on the monthly income generated by our 401(k)s, pension, Social Security, etc., and leaving whatever may be left to my son.


‘The other issue is that my husband no longer gets along with my dear son at all, and feels no obligation to get along with him.’

I am not interested in scrimping, but I want to be able to have enough money to last us until age 90 (or beyond) by not touching the principal. My husband is more interested in dipping deep into our savings, and living it up in retirement while we are young enough to enjoy it.

The other issue is that my husband no longer gets along with my dear son at all, and feels no obligation to get along with him, to the point that neither one wants anything to do with the other. As far as he is concerned, my son doesn’t meet his expectations, and so deserves nothing from me and certainly nothing from him.

I want my estate planning to be fair to both my new husband and my son. How do people typically handle this type of quandary? I think that I need to create some type of trust to pass on my share of our estate to my son. My pre-marriage assets involved my son as I pursued my graduate degree through night school and worked long hours throughout his childhood.

Second Wife

You can email The Moneyist with any financial and ethical questions related to coronavirus at qfottrell@marketwatch.com.

Dear Second Wife,

Don’t allow your husband’s feelings toward your son to influence your estate planning.

Your relationships with your husband and your son and your own plans for retirement are all fair game when making decisions about your estate, but your husband and son’s fractured relationship is their business, not yours. You worked hard for this money, and your son is your legal heir. Any effort by your husband to spend all of your savings and fritter away any inheritance that you intended to leave to your son should be resisted at all costs.

You have worked too hard your entire life to compromise your plans for a comfortable retirement where you have money set aside for long-term medical care insurance, unforeseen emergencies and/or your son. If you jointly own your home, you can leave your half to your son in your will, and specify it can only be sold after your husband passes away.

If you own the home, you can give your husband a life estate. Your son would pay capital-gains tax on the value of your home when he sells it, and not when you bought it. You could also make your son the beneficiary on your life-insurance policy, and/or gift him a certain amount of money per year to see how he manages and spends that money.

Figure out what is fair to yourself first before moving on to what is fair to your husband and your son. It’s OK to put your needs first. I caution against your dipping into savings at a rate that is beyond your own risk tolerance.

Ultimately, you are entitled to leave all other separate property to your son when you die — and, along with a financial adviser, set up a trust with that in mind for you, your husband and your son. Not necessarily in that order.

The Moneyist: ‘I cut his hair because he won’t pay for a haircut’: My multimillionaire husband is 90. I’ve looked after him for 41 years, but he won’t help my son

Hello there, MarketWatchers. Check out the Moneyist private Facebook
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 group, where we look for answers to life’s thorniest money issues. Readers write in to me with all sorts of dilemmas. Post your questions, tell me what you want to know more about, or weigh in on the latest Moneyist columns.

By submitting your story to Dow Jones & Company, the publisher of MarketWatch, you understand and agree that we may use your story, or versions of it, in all media and platforms, including via third parties.



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These money and investing tips can help you make a place for crypto in your portfolio

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Don’t miss these top money and investing features:

These money and investing stories, popular with MarketWatch readers over the past week, can give you a better understanding of bitcoin and other cyrptocurrency, and help you figure out if digital currency has a place in your portfolio alongside stocks, bonds and other traditional assets.

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