Stocks have taken a turn for the worse today, amid a number of growing concerns both here and abroad. Among equities in focus, tech issues Intel Corporation (NASDAQ:INTC) and ARM Holdings plc (ADR) (NASDAQ:ARMH), as well as coal concern Peabody Energy Corporation (NYSE:BTU) have all attracted the attention of analysts.

• Disappointing sales in INTC's mobile and communications division have overshadowed a generally upbeat third-quarter earnings report, sending shares plunging 4% to $30.84 -- and analysts weighing in. No fewer than eight brokerage firms upped their price targets on INTC, but Morgan Stanley took the road less travelled, and cut its outlook on the stock to "underweight" from "equal weight." Today's sharp move lower only highlights the security's recent troubles, with shares of Intel Corporation down 8.3% from last Thursday's close at $33.62. Should the shares continue to struggle, another round of downgrades could apply additional pressure. At present, 16 covering analysts maintain a "strong buy" recommendation, versus 14 tepid "holds" and just two "sells."


• Ahead of ARMH's turn in the earnings confessional after Tuesday morning, Canaccord Genuity reduced its price target on the stock to $55 from $58 -- and underscored its "buy" rating. However, this new target still represents expected upside of 38% to the security's current perch at $39.93, and should ARM Holdings plc (ADR) extend its 27% year-to-date deficit, another price-target cut could be on the horizon. Elsewhere, option traders have taken a decidedly bearish route, as evidenced by the stock's 10-day International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) put/call volume ratio, which ranks in the 86th percentile of its annual range.


• It's been a terrible year for BTU, with the shares down more than 46%. In today's session, the stock was last seen 3.1% lower at $10.47, after Imperial Capital started the security with an "underperform" rating -- and assigned certain senior notes with a "sell" recommendation -- citing increasing leverage and instability in the international coal community. Despite Peabody Energy Corporation's long-term technical troubles, pockets of optimism can still be found around the Street. In fact, 10 out of 15 analysts maintain a "buy" or better suggestion toward the stock, versus five "hold" or "sell" ratings. If BTU disappoints when it takes to the earnings stage ahead of next Monday's open, the door is wide open for another round of bearish brokerage notes.

U.S. stocks are pointed lower ahead of the bell, as traders digest lackluster economic data and news of another Ebola case in the U.S. On the M&A front, today's stocks to watch include pharmaceutical firm AbbVie Inc (NYSE:ABBV), as well as tech issues EMC Corporation (NYSE:EMC) and QUALCOMM, Inc. (NASDAQ:QCOM).

• ABBV is dominating pre-market headlines, after the firm said it's reconsidering its takeover of U.K. peer Shire PLC (ADR) (NASDAQ:SHPG) in the wake of Uncle Sam's attempts to curb tax inversions. Should ABBV abandon its bid -- and analysts at Bernstein think there's a 75% chance it will -- the firm would be on the hook for about $1.6 billion in breakup fees to SHPG, and some believe a U-turn could have broader implications for overseas M&A. AbbVie Inc's board will meet to discuss the merger on Monday, Oct. 20. Against this backdrop, ABBV shares are pointed 4.6% lower ahead of the bell, after settling at $54.13 on Tuesday, likely much to the delight of short sellers. Short interest increased by more than 19% during the past two reporting periods, and represents nearly nine sessions' worth of pent-up buying demand, at the stock's average pace of trading.


• EMC is headed 1.2% lower, after landing at $27.61 on Tuesday, as traders weigh reports that Hewlett-Packard Company (NYSE:HPQ) has ended merger talks between the two. The shares of EMC Corporation are up nearly 10% in 2014, but have tumbled in step with the broader equities market of late, and are now testing support atop their 32-week moving average. The company will unveil its quarterly earnings before the open on Wednesday, Oct. 22, and if history is any indicator, the shares could stage a retreat. During the past eight quarters, EMC has averaged a one-week post-earnings loss of 1.3%. Nevertheless, analysts remain optimistic, with 21 out of 25 offering up "buy" or better endorsements.


• Finally, QCOM is modestly lower in pre-market action, on news the company will pay $2.5 billion for British chipmaker CSR Plc, trumping rival Microchip Technology Inc. (NASDAQ:MCHP). A negative reaction on the charts would bode well for the recent crop of QUALCOMM, Inc. option bears, as the stock's Schaeffer's put/call open interest ratio (SOIR) of 0.69 sits just 8 percentage points from an annual high. In other words, short-term options players have rarely been more put-biased during the past year. Technically speaking, QCOM has surrendered 3.2% in 2014, and is currently perched at $71.86, just north of its 20-month moving average.

Analysts are weighing in today on Dow components Caterpillar Inc. (NYSE:CAT) and Johnson & Johnson (NYSE:JNJ), as well as offshore driller Transocean LTD (NYSE:RIG). Here's a quick roundup of today's bearish brokerage notes on CAT, JNJ, and RIG.

• CAT saw its price target slashed to $108 from $119 at Credit Suisse, which nevertheless maintained its "outperform" rating. It's been a ho-hum year for the shares, which have advanced just 2.2% to trade at $92.80, and have been in a steady downtrend since the start of September. Not surprisingly, 11 out of 17 covering analysts have doled out "hold" opinions on Caterpillar Inc., compared to six total "buy" endorsements. Looking ahead, the company will report third-quarter earnings next Thursday morning.


• JNJ -- which paced the Dow's losers on Tuesday despite stronger-than-expected quarterly earnings -- was barraged by bearish brokerage notes this morning. Specifically, Cowen and Company lowered its target price to $114 from $117, Raymond James reduced its target to $107 from $113, Goldman Sachs cuts its expectations to $97 from $105, and Piper Jaffray trimmed its benchmark to $107 from $110. However, while the former two reiterated "outperform" ratings, the latter two underscored "neutral" opinions. On the charts, Johnson & Johnson is up a respectable 5.9% year-to-date to rest at $97.01. Nevertheless, the stock's 50-day put/call volume ratio of 0.88 on the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX) ranks just 1 percentage points from an annual bearish acme.


• Finally, RIG got hit with a pair of negative analyst notes earlier. Specifically, Deutsche Bank slashed its price target to $16 from $27, while ISI Group initiated coverage on the shares with a "sell" rating and $27 price target -- lower than the current price of $28.97. It's no wonder the Street is bearish toward Transocean LTD; the stock has plunged 41.4% in 2014. Short sellers have been swarming RIG, too, as almost one-quarter of the security's float is sold short, which would take 7.7 sessions to buy back, given average daily trading levels.

Analysts are weighing in today on camera maker GoPro Inc (NASDAQ:GPRO), semiconductor concern Micron Technology, Inc. (NASDAQ:MU), and sportswear giant Nike Inc (NYSE:NKE). Here's a quick roundup of today's bullish brokerage notes on GPRO, MU, and NKE.

• Despite having it rough recently -- with the shares down nearly 24% since hitting a record high of $98.47 on Oct. 7 -- GPRO received a price-target hike to $56 from $54 at J.P. Morgan Securities. However, the brokerage firm also affirmed its "neutral" rating, while Pacific Crest started coverage with a "sector perform" opinion. Overall, Wall Street is skeptical of GoPro Inc, as seven out of nine covering analysts have assigned "hold" assessments, versus just two "strong buys," and the stock's consensus 12-month price target of $82.63 is just 10% above the current share price of $75.03.


• J.P. Morgan Securities upped its rating on MU to "overweight" from "neutral," due to strong demand for DRAM and NAND. Elsewhere, on the charts, the equity has outperformed, adding nearly 26% year-to-date to trade at $27.39. Meanwhile, at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), Micron Technology, Inc. has racked up a 10-day put/call volume ratio of 0.41, which ranks in the bearishly skewed 84th percentile of its annual range. Should these skeptics capitulate amid the stock's long-term strength, it could lead to tailwinds.


• Finally, NKE was added to Goldman Sachs' "Conviction Buy" list, as the firm believes current fears about overseas markets have resulted in an attractive entry point. On the technical front, Nike Inc has advanced 15.4% year-over-year to rest at $85.09, and as recently as Oct. 6, hit a record high of $90.50. Nevertheless, the security's Schaeffer's put/call open interest ratio (SOIR) of 1.27 -- which ranks higher than 89% of similar readings taken in the past 12 months -- reveals short-term traders have been more put-focused than usual, among options expiring in the next three months. A shift in opinion among these speculators could provide NKE with a boost.

One of the features of big market drops is that you get all the Macro-Perma Bears back on the TeeVee -- such as this one from CNBC.

Technical strategist Abigail Doolittle is holding tight to her prediction of market doom ahead, asserting that a recent move in Wall Street's fear gauge is signaling the way.

Doolittle, founder of Peak Theories Research, has made headlines lately suggesting a market correction worse than anyone thinks is ahead. The long-term possibility, she has said, is a 60 percent collapse for the S&P 500.

In early August, Doolittle was warning both of a looming "super spike" in the CBOE Volatility Index as well as a "death cross" in the 10-year Treasury note. The former referenced a sharp move higher in the "VIX," while the latter used Wall Street lingo for an event that already occurred in which the fixed income benchmark saw its 50-day moving average cross below its 200-day trend line.

Nailed it! Except not really. I'm not sure exactly when she started making the call, but per the article, the S&P 500 Index (SPX) is little changed since she made it. For what it's worth, she expects the CBOE Volatility Index (VIX) to ultimately pop to 90, so we have just a tad more to go.

Here's my advice: religiously ignore all these big-picture calls. The best way to get some ink is to make a call that stands out from the pack. This one sure meets that criterion. There are lots of perma bears out there, but I'm hard-pressed to find one with this extreme an outlook.

There's a rather large downside to setting up a portfolio to play for a huge market drop and/or VIX pop. There's a very high probability that it never comes to pass, and you've either foregone the upside in the market or wasted money VIX calls or whatever.

But conversely, there's very little downside in actually making a bold call. The financial media will tend to focus on the call itself, not the timing around it. If you started calling for doom at 180 in the SPDR S&P 500 ETF Trust (SPY) and it goes to 200 first and then crumbles back to 180, you really haven't done too well in the actual investing/trading game. But hey, you called the panic!

There's also a small whiff of "Survivorship Bias" at play here. Let's say you set up a sort of market prognostication tournament with 16 seers. Pair them off in eight head-to-head contests, the winners after a month move on, the losers go home. Do it again with the eight winners. Then again and again, and you end up with the "best" market seer. Does the winner have particular ability to call the market? Possibly. But, it's also possible he/she simply is the "seer" because based on the format, someone had to win the contest.

What if instead of 16 contestants we had 160 market prognosticators making calls at random intervals. Odds are, some of them will get it right. And, those winners now get more attention, and some of them still have it right for the next move -- and so on. Are the ultimate winners experts, or are we simply fooled by randomness?

My point isn't that these people don't have talent, because they absolutely do. Rather, calling some sort of macro-move is a very bad way to judge them and their value to you as an investor.

Disclaimer: Mr. Warner's opinions expressed above do not necessarily represent the views of Schaeffer's Investment Research.

The following is a reprint of the market commentary from the April 2015 edition of The Option Advisor, published on March 26. For more information or to subscribe to The Option Advisor, click here.

Apple Inc. (AAPL), which joined the storied ranks of the Dow Jones Industrial Average (DJIA) in mid-March, is in the midst of a notable technical lull. The stock has been primarily range-bound between the $120 and $130 levels for over a month, and Trade-Alert calculates AAPL's 60-day historical volatility at 27.6% -- a reading that ranks below 99% of others taken over the past 52 weeks.

From a longer-term perspective, AAPL appears to have earned this breather. The shares have gained about 63% in the past year, and in February managed to break out above round-number pressure in the $120 area.

And hopes remain high for AAPL's stock to continue its role as an unstoppable juggernaut on the charts. Analysts have been busy hiking their price targets during this six-week stagnation, with no fewer than 15 of these bullish notes hitting the wires (there was even one from Berenberg, which -- while reiterating a "sell" rating -- upped its price target to a still-miserly $85). Cantor Fitzgerald issued the boldest call, as its new 12-month target of $180 represents a prediction that AAPL's market cap will reach $1 trillion.

Barron's has also gotten in on the action, with a Feb. 21 feature titled "Apple Shares Could Return 25% in a Year." The article posed the question, "Might Apple now be topping out again?" -- then immediately dismissed this hypothetical as "unlikely," and predicted a "rise to $160 over the next year."

Not everyone is placing their chips on AAPL breaking out to the upside, however. The equity's front-month, gamma-weighted Schaeffer's put/call open interest ratio (SOIR) stands at 1.38, indicating that puts outnumber calls among near-the-money strikes in the April series of options. Likewise, data from the major options exchanges suggests speculators have recently shown a healthier-than-usual appetite for bearish puts, relative to bullish calls.

In the same vein, short interest on AAPL rose a net 7.6% over the past two reporting periods, with the number of bearish bets turning higher from a near four-year low. So, even bearing in mind that some of the AAPL put players could be longs seeking a short-term hedge, it appears there's plenty of skepticism beginning to creep in.

In fairness, it's very tempting to call a top on AAPL right now -- a DJIA anointment, the launch of the $10,000 gold Apple Watch, and a $1 trillion market-cap prediction, all within the space of a few weeks? Not to mention an outpouring of bullish analyst notes, and a rumored entry into the electric car market ... and all of this coinciding with flattish price action in the stock. On its face, it's the kind of frothiness contrarian case studies are made of.

But as I reminded my Chart of the Week* subscribers in a recent AAPL commentary, it's never a good idea to short the strongest stocks -- a description that still applies to AAPL, regardless of the current sideways trend. In fact, this name has been a particularly challenging one for contrarians to trade over the years, as the characteristically high levels of optimism have, more often than not, been matched by a strong showing on the fundamental and technical fronts.

With that in mind, I've set forth below some of the crucial technical levels to watch for AAPL during the short term. It's impossible to predict with any certainty right now whether the stock's next major move will be higher or lower -- but AAPL's behavior around these key price points should provide some valuable clues in the coming weeks:

• $133.60 = all-time high
• $132.46 = +20% year-to-date return
• $121.42 = +10% YTD gain
• $120.24 = 10% correction from all-time high

*For more information about Chart of the Week, or to subscribe, please contact your Schaeffer's consultant.

The following is a reprint of the market commentary from the March 2015 edition of The Option Advisor, published on February 26. For more information or to subscribe to The Option Advisor, click here.

Just within the past year and a half, the number of major corporations that have fallen victim to cyberattacks is nothing short of alarming. By now, quite a few brands that U.S. consumers interact with on a daily basis have earned this dubious distinction -- including Target (TGT), Home Depot (HD), Amazon.com (AMZN), eBay (EBAY), Anthem (ANTM), and Sony (SNE) (with the last of these enduring what might be the most bizarre iteration of the by-now-familiar tale).

So perhaps it was inevitable that November 2014 brought us the launch of the PureFunds ISE Cyber Security ETF (HACK), an exchange-traded fund based on the companies that swoop in to provide damage control and preventive services for those targeted by hackers. HACK, with its on-the-nose ticker, settled at $25.10 on its first day of trading, and more recently has been testing its mettle around the $30 level.

Meanwhile, speculative interest on HACK has exploded -- and primarily on the call side of the equation. At year-end 2014, total open interest on HACK was fewer than 1,000 total contracts, with only 628 calls and 169 puts outstanding. As of Feb. 26, those figures had climbed to 3,812 calls and 636 puts. In other words, during a period of time in which HACK gained about 10%, open interest on the fund surged 458%.

Taken out of context, that factoid may make it seem as though the HACK bandwagon has quickly erupted from virtually nonexistent to bulging at the seams -- but note that total open interest is still at a relatively low absolute level, which suggests that we may yet be in the early innings of this particular trend.

In fact, among HACK's top 10 holdings is relative newcomer FireEye (FEYE), which appears to have the near-textbook makings of an Expectational Analysis ^® play. The company has been called in to address some of the higher-profile corporate hacking cases, including the Sony debacle, and the shares have gained nearly 44% in value year-to-date (with just under two full months of trading on the books).

Yet against this backdrop of strong demand and breakout price action, there are signs of significant skepticism toward FEYE. For starters, a full 45% of analysts maintain a "hold" or "sell" rating on the stock, and the average 12-month price target of $43.35 is south of FEYE's current price.

Elsewhere, we find 15.7% of FEYE's float in the hands of short sellers, following a nearly 7% increase during the most recent reporting period -- a two-week stretch of time during which the shares advanced some 25%, flying in the face of this steady selling pressure. And finally, options traders are similarly unimpressed, with Schaeffer's put/call open interest ratio (SOIR) for FEYE arriving at 0.97, in the 98th annual percentile.

The takeaway from all this -- in addition to the likelihood of further additional upside from FEYE, from our perspective -- can be whittled down to: context matters. A surge in option open interest on a buzzed-about sector like HACK might incite knee-jerk feelings of skepticism among seasoned contrarians (and justifiably so, in some cases). And indeed, not all of HACK's top holdings are winners. A look at the price action in KEYW Holding (KEYW), for example, certainly doesn't inspire any bullish confidence.

When it comes to FEYE, however, the stock is hardly crumbling under the weight of lofty expectations. For those intrigued by the prospects for cybersecurity firms, this is one stock that's backing up the hype with its solid performance.

The following is a reprint of the market commentary from the February 2015 edition of The Option Advisor, published on January 22. For more information or to subscribe to The Option Advisor, click here.

In a recent commentary to my "Chart of the Week" subscribers, I discussed a stiff layer of resistance that's emerged for the small-cap focused iShares Russell 2000 Index ETF (IWM). The $120 region has kept a lid on IWM for the better part of the past year, most likely because it represents the convergence of two significant technical levels.

Specifically, $120.18 represents double IWM's October 2011 low, while $122.10 represents a 50% gain from the fund's December 2012 trough. Given the tendency of investors to "take the money and run" at these kinds of significant percentage returns, it's no surprise that IWM peaked just north of $120 on three separate occasions last year -- in March, July, and December -- before retreating.

In addition to these formidable price points, IWM is now staring up at an accumulation of more than 63,000 calls in open interest at the newly front-month February 120 strike. This is not necessarily a colossal level of outstanding contracts by "index-based ETF" standards -- but, given IWM's nearly year-long battle with $120, it's certainly notable that this is the site of peak front-month call open interest.

Anecdotally, there seems to be a growing consensus that small-caps -- on the heels of a disappointing 2014, relatively speaking -- are set to resume a leadership role this year. Consider this selection of headlines from the last month:

"How US small caps will pay for my son's tuition at Stanford" - MarketWatch, Dec. 30
"Focus on Small Caps in 2015" - Investing.com, Jan 6
"Stock pickers bet on small caps, Apple" - CNBC, Jan. 13
"Small caps to benefit most from US recovery" - The Globe and Mail, Jan. 16

So we have IWM trading beneath stubborn resistance, even as bulls appear to be ramping up their expectations for some kind of redemption narrative in the small-cap space, possibly including -- based on the front-month open interest configuration -- a breakout north of $120 in the short term. Do we have the makings of a bearish contrarian play on the small-cap ETF?

Well, not so fast. In recent months, IWM has established a floor in the $115 region. Since Oct. 31, in fact, IWM has settled outside of the $115-$120 range on only eight occasions. In other words, that's nearly three solid months' worth of a sideways chop within a roughly 5-point range. Not only is the potential reward for capturing a directional move within this channel rather strictly capped, but correctly timing such a trade would be extremely difficult.

In addition, IWM's rising 80-week moving average is now at $112.58, and has been increasing at a rate north of 50 cents per week. This trendline served as support over the course of the sharp pullback in October 2014, as there were just two weekly closes below this moving average, and the retest of 80-week support near the end of the month marked the "all clear" and the beginning of the subsequent IWM rally back to its highs.

One of the many advantages of options trading, of course, is the ability to capitalize on virtually any variety of price action, including the otherwise generally frustrating "sideways chop" now being demonstrated for us by IWM. If a trader wanted to profit from a stock's trading range, selling premium would be the way to go -- either by selling to open puts or calls individually, or by combining contracts to create iron condors or other flavors of credit spreads.

Of course, just because there's a strategy in the options universe that aligns with a given stock's price action doesn't necessarily mean you should jump to place the order with your broker. One of the "wild card" factors often overlooked (and at great cost) by novice options traders is implied volatility, which plays a significant role in determining an option's value -- and, by extension, your possible reward on a trade.

In the simplest terms, higher implied volatility is a detriment to premium buyers, but a positive for premium sellers. And when you're selling to open puts and calls, whether on their own or as part of a multi-legged credit spread, you are a net seller of option premium.

Our Senior Equity Analyst Joe Bell, CMT, has quite a bit of experience selling credit spreads, and IWM has been the target of more than one of his trades over the years. By his lights, though, the timing isn't quite right to sell premium on the small-caps. "Implied volatility has come down about 20% off its January highs," he notes. "While $120 continues to be a hurdle for the ETF technically, traders may want to watch for a spike in volatility to set up an entry for any premium selling positions." In the meantime, it would appear that the best IWM trade -- at least for the moment -- is no trade at all.

The following is a reprint of the market commentary from the January 2015 edition of The Option Advisor, published on December 18. For more information or to subscribe to The Option Advisor, click here.

As of this writing, the Fed's promise to be "patient" on interest rates seems to have snapped stocks out of the slump they endured during the first half of December -- suggesting the positive momentum that traditionally carries the S&P 500 Index (SPX) higher into year-end may finally be gaining traction. Of course, for a market that makes 2% moves on the basis of what is, for all intents and purposes, an adjective update by the central bank, there are certainly no guarantees that 2015 will bring us smooth, low-volatility gains.

In my Dec. 7 "Chart of the Week" column, I discussed the significance of the 40 level on the VelocityShares Daily Inverse VIX Short-Term ETN (XIV). During the bulk of 2014, moves above 40 for this "inverse volatility" vehicle have corresponded with positive returns for the S&P, while breaks below this round-number level have been reliable indicators of volatility spikes (and coincident equity sell-offs). Indeed, once again, the XIV rejection at 40 earlier this month coincided with fresh pain for stocks, even as the action in the major equity indices themselves failed to offer any hints of trouble ahead.

In the short term, it will be worth shifting the focus a bit south, and watching XIV's progress as it works its way back up toward 36. This area marked a peak for the exchange-traded note back in January, and then switched roles to provide support in August. Just a couple of months later, a daily close below this level on Oct. 9 signaled an impending volatility spike. As XIV advances, a rejection at 36 could be an effective "canary in the coal mine" for an impending rough patch for stocks.

Looking beyond XIV, there are several other significant technical levels that should come into play for the major indices in 2015. The latest surge in the CBOE Volatility Index (VIX) topped out around 24, roughly double its November-December lows in the 12 region. Amid this week's bounce in stocks, the VIX quickly pulled back below 20 -- a round number that could continue to act as resistance on rallies, as it's double the index's current annual low of 10.28.

In fact, the VIX has spent most of the past two-and-a-half years sandwiched between 10 and 20. Since mid-June 2012, the index has notched only four weekly closes on the upside of this range, and zero below. Look for these decade levels to continue marking key tops and bottoms in the new year.

As you might expect when a benchmark trades around a major millennium mark, there's been a lot of chatter about S&P 2,000 lately. While it's obviously a nice round number, 2,000 holds some additional significance for the S&P, as this price point represents a near-exact tripling of the index's March 2009 low at 666.79. It wouldn't be surprising to see this area continue to act as a "magnet" for the S&P in the coming months, as these round-number milestones have a tendency to do.

In terms of support, any pullbacks by the S&P could be contained by one of two key long-term trendlines. Its 10-month moving average, located at 1,969.30, has been cushioning the index's dips since June 2012. Meanwhile, the 20-month moving average is at 1,849.20, or roughly 20% above the peaks set by the S&P directly prior to the bear markets that began in 2000 and 2007.

Speaking of "magnetic levels," the small-cap Russell 2000 Index (RUT) has spent a healthy portion of 2014 trying to break free of the gravitational pull of its 2013 close at 1,163.64. On the upside, the 1,200 level has capped rally attempts, and no wonder -- this round-number region represents roughly double RUT's March 2000 peak and October 2011 low, and approximately triple its 2008-2009 lows. It's no mystery, then, that profit-taking tends to overwhelm RUT every time it challenges this region.

As major equity indices attempt to mount sustained breakouts above significant round-number levels, a crucial question becomes: Is there enough buying power left on the sidelines to push stocks higher from here? Surveying a few of our favorite broad-market indicators, we find that total short interest on S&P components has declined 2.2% since the end of 2013, while the number of analyst "buy" ratings on these stocks has increased 1.7 percentage points over the same time frame. Meanwhile, the ratio of bulls in the weekly Investors Intelligence (II) survey has dropped to 49.5% from 61.6%.

So, during a period in which the S&P has gained about 11.5%, and set new record highs in the process, sentiment has increased only marginally at best, and -- in the case of the II survey -- actually deteriorated. While it would be short-sighted to overlook the significance of major round-number "magnets" that could continue to hold sway over stocks in the coming months, it seems fair to observe that we're not yet at the "euphoria" stage of this bull market. Keep an eye on XIV as a possible "tell" for short-term shocks, but look for the major equity indices to ultimately extend their climb up this persistent wall of worry in 2015.

My guess is you are familiar with the appearance of charts of the CBOE Volatility Index (VIX) over the past year or two. "Ugly" would be a common way technical analysts (including this observer) steeped in charts of equities would describe them -- the endless, directionless chop; the declines that inevitably (and usually abruptly) terminate in the 10-12 area; the sharp rallies that seem to end as quickly as they begin (rarely lasting for more than three weeks, give or take).

Of course, there is a very plausible explanation for these VIX chart characteristics, in the sense that in charting a volatility measure we are, by definition, tracking the fluctuations in a mean-reverting series whose "perturbations" are (quite naturally) often quite extreme and simultaneously quite brief. (The fact that volatility behaves in this manner would seem to be a deterrent to the widespread use of volatility derivatives to "protect" portfolios, but that's a separate discussion.)

But the folks at Credit Suisse seem to have created some order out of chaos in designing and structuring their VelocityShares Daily Inverse VIX Short-Term ETN (XIV). This may be due in no small measure to the fact that equity volatility has had a bias to the low side in recent years. When this is superimposed upon the daily adjustments that characterize the calculation of the XIV (and the fact that the XIV -- as an inverse ETN -- increases in price over periods in which the VIX declines), it often translates into upward XIV price movement that can be rather smooth and steady (as illustrated by the XIV rally from February through July 2014, as depicted on the accompanying chart). And such equity-like price action also creates opportunities to identify price levels that may be of particular significance from a volatility perspective, such as the 40 level for XIV on which our chart is focused.

Note how XIV sliced through the 40 level in early June and, after a brief re-test, went on to what was then (and still remains) an all-time high at 47.66 on July 3. And except for a brief period in early August, XIV traded above 40 from early July through most of September. What turned out to be a decent warning signal for trouble ahead (in the form of the mid-October market correction) was the dip by XIV below 40 in late September, followed by an unsuccessful re-test on Oct. 6 (and further confirmed by the close on Oct. 9 below support at 36). To recap: We had a pretty clear indication that XIV -- which moves in the direction opposite that of the VIX -- was breaking down technically. And by straightforward extension, this was therefore an indication that the VIX may have been headed for an upside pop, which by now we all know strongly implied that the market was about to take a hit.

And right here and now, it looks like the XIV is at an inflection point, though none is apparent from the charts of the major equity indices, which have all been registering all-time highs with almost boring regularity. Because after rallying sharply from its low of 24.67 on Oct. 18 (in conjunction with the sharp decline in the VIX and the concurrent sharp rally in equities), the XIV's upside progress over the past week or so has been stalled in the 40 area. In fact, this past Friday was the first trading day since Oct. 6 that the XIV had traded above 40, and after its early peak at 40.74, the XIV barely managed to remain above the 40 level -- closing at 40.07 after dipping as low as 39.70 late in the session.

So -- as I pointed out in the discussion on the XIV chart -- we are at a juncture in which further upside progress by XIV above 40 would be consistent with further upside for the market. But if this assault by XIV on the 40 level is repelled, things could begin to get pretty dicey for the market pretty quickly, especially if we once again dip below XIV support at 36. Would this decline resemble October's crash-like (but thankfully, brief) market plunge? It is impossible to say at this point, and by this I mean anything would be possible -- including a pullback that inflicts greater damage over a longer time frame. But my strong inclination would be that if we are destined for major market damage, this would not occur until after the first of the year.

This "Chart of the Week" commentary originally appeared in the Dec. 7, 2014 edition of Weekend Player.

The following is a reprint of the market commentary from the December 2014 edition of The Option Advisor, published on November 20. For more information or to subscribe to The Option Advisor, click here.

"May you live in interesting times" goes the old curse -- but please don't take it the wrong way if we observe that it's been an interesting couple of months in the market, to say the least. Both bulls and bears have endured their fair share of jolts, but there have also been some remarkable profit opportunities for longs and shorts alike.

Where to begin with an analysis of the recent action in the S&P 500 Index (SPX)? Well, the Sept. 19 initial public offering (IPO) by Chinese e-commerce giant Alibaba Group (BABA) is a logical place to start, as many pundits predicted the widely hyped IPO would mark a top for the S&P. (A quick Google search for "Alibaba IPO market top" is informative here, yielding north of 5 million results.) In fact, the same day that BABA made its trading debut on the Big Board, the S&P touched a then-record high of 2,019.26.

Of course, as discussed in this space last month, the index proceeded to tumble 9.8%, peak to trough, over the next 18 sessions. While the magnitude of the correction wasn't all that remarkable within the context of a long-term bull market, the sheer speed of the drop sparked panic -- as well as a few victory laps by perma-bears and BABA top-callers.

Those victory laps were a bit premature, though. After bottoming at 1,820.66 on Oct. 15, the S&P spent the final 12 trading days of the month riding the rebound express. The index finished October at a new daily closing high -- and then rang in the month of November by tapping a record intraday peak right out of the gate. For the first time in its history, the S&P went from an all-time high to a six-month low, and then back to an all-time high, in less than two months.

Since then, the S&P has been grinding steadily higher, creating a string of new all-time highs despite a lack of major day-to-day moves. As of this writing, 10-day realized volatility on the S&P stands at 3.03% -- just high enough to confirm the market has a pulse, though the patient appears to have come down with a minor case of exhaustion.

So, where do we go from here? Over a sufficiently long time frame, history tells us that the market will always trend higher -- but, of course, it's the ability to capture the not-quite-so-predictable short-term moves that defines our success as traders. With that in mind, there's good reason to think stocks will continue their steady march higher over the coming weeks.

For starters, there's good old Santa Claus and his reliable rally. The S&P averages a return of 1.5% during the month of December -- second only to April -- and finishes the month higher 74% of the time, going back 50 years. Most of those gains are racked up during the second half of December; the S&P has advanced an average of 1.4% during the last five days of December and the first two days of January (the traditional "Santa Claus rally" period).

Of course, it's fair to theorize that these year-end gains are generated not by St. Nick, but (to a non-trivial extent) by fund managers scrambling to boost their paper performance -- the reliable old "window dressing" tailwind. According to Morningstar data, the average U.S. equity fund was trailing the S&P by more than 5 percentage points, on a year-to-date basis, as of Nov. 19. As fund managers rush to keep pace with the stock market, buying activity by these deep-pocketed players should be a positive catalyst through year-end.

In addition to our regularly scheduled end-of-year programming, it seems the type of "V bottom" the S&P just created may also have bullish implications. Our Senior Quantitative Analyst, Rocky White, ran a study to measure the index's performance following moves similarly dramatic to the one described above. Since 1929, there have been 12 instances where the S&P has touched a 52-week high, pulled back to a two-month low, and -- less than one month after that -- overtook the recent 52-week high again. Following these signals, the S&P has averaged gains that outstrip its "anytime" returns over one-month, three-month, and six-month time frames.

So, while the forecast seems to point to additional upside ahead, the recent S&P whiplash reinforces the notion that it's always wise to expect the best, but prepare for the worst (advice that rings equally true whether you're a perma-bear, perma-bull, or pragmatist). At 13.58, the CBOE Volatility Index (VIX) is currently running at a considerable premium to S&P realized volatility -- but, that said, the VIX is down about 56% from its highs of just over a month ago. As such, now is as good a time as any to pick up portfolio protection, in the form of put options, to both protect your paper profits and guard against any additional shocks over the short term.

The following is a reprint of the market commentary from the November 2014 edition of The Option Advisor, published on October 23. For more information or to subscribe to The Option Advisor, click here.

The week of Oct. 13 was a wildly volatile one for stocks. Due to a combination of disappointing economic data, mixed corporate earnings, and fears about the spread of Ebola, the major equity indexes were hit with heavy selling pressure.

In fact, the dramatic market action that week resulted in the highest total number of selling climaxes since Sept. 29, 2011. (A "selling climax" occurs when a stock hits a new 52-week low, but then settles above the previous week's close.) As indicated on the chart below, important market turning points in the recent past have often been accompanied by a huge spike in the total number of these types of climaxes. While it's obviously too soon to make the call -- there was a cluster of multiple selling climaxes in 2011, before the market eventually found its footing -- this could be a sign that we're in the process of capitulation.

With such dramatic volatility accompanied by a sharp sell-off, did we finally get the infamous 10% correction on the S&P 500 Index (SPX)? Not quite. Based on the index's 2014 intraday high of 2,019.26, and its Oct. 15 intraday low of 1,820.66, we registered a 9.8% pullback. Despite "failing" to reach this benchmark, the S&P did break below its 200-day moving average for the first time since November 2012.

Prior to breaching this widely followed trendline, the S&P had spent 477 consecutive trading days above it -- the third-longest such streak since 1950. As you might imagine, the index's drop below its closely watched 200-day sparked a ripple of panic among market watchers. This surging anxiety was reflected by a nearly three-year high in the CBOE Volatility Index (VIX), which occurred simultaneously with the S&P's 200-day break. (Anecdotally, StockTwits data shows that message volume for VIX spiked dramatically on Oct. 15 and 16, confirming a sudden flurry of interest in the market's "fear gauge.") So while the 200-day breach clearly triggered a wave of fear among investors, does this technical development necessarily suggest more pain and selling is ahead?

If history is any guide, the answer is most likely "no." Since 1950, there have been 13 other streaks similar to the one that just ended, where the S&P spent at least 252 trading days (approximately one year) above its 200-day moving average. The last three times a streak like this ended, the S&P proceeded to collect double-digit returns over the next 12-month period -- ranging from a 45.8% rally following the July 1996 trendline breach, to an 11.5% rise after the July 2004 break.

From a broader view, looking back at all 13 prior occasions when the S&P has breached its 200-day moving average after a long winning streak above it, the index has averaged a gain of nearly 12% over the next 12 months -- besting its average "anytime" one-year return of 8.8% since 1950. In other words, in circumstances in which the index has been firmly entrenched in upside action consistent with a bull market, that first break below the 200-day has typically represented a correction and a buying opportunity, rather than a sell signal.

However, for those traders who may have panicked out of their long positions following the S&P's break below its 200-day trendline, the market's quick and nimble reversal from its recent slump may have come as an unpleasant (and potentially costly) surprise.

On the other hand, if you'd also had the less-popular 320-day moving average -- a trendline we at Schaeffer's have favored for years -- on your trading radar, you would have spent Oct. 15 witnessing a very tidy S&P pullback to this level. While the index briefly dipped below its 320-day in intraday action, this trendline was never breached on a daily closing basis. This test of moving average support was followed in short order by an S&P rebound back above its 200-day, and the index has continued to recover impressively from that bout of wild mid-October volatility.

In light of these developments, it seems safe to affirm our belief that one indicator does not a trading system make. Despite the surge in fear that accompanied the S&P's most recent 200-day breach, the index's past performance suggests that this technical occurrence, when it follows on the heels of a long streak of outperformance, is rarely a reliable sell signal. By viewing day-to-day price swings within the context of longer-term trends, it's possible to keep your head while others around you are losing theirs. And it's worth reiterating that a roughly 10% pullback within the context of a years-long uptrend is, to a certain extent, inevitable -- as bull markets are quite unlikely to take the form of a straight vertical line (even though some of these 10% haircuts may transpire a little faster than the typical trader's constitution can comfortably endure).

Going forward, we recommend that you continue to watch the S&P's 320-day moving average as a key level of support, in order to keep the bigger-picture trend in perspective. And with earnings season, mixed economic data, and shifting monetary policy keeping traders on their toes, our Monday Morning Outlook column will help you stay current with the crucial technical levels we're watching each week.