Weekly Stock Market Commentary 2/27/2015

By Lawrence G. McMillan

The stock market continues to move higher, albeit at a very slow pace. That makes the $SPX chart bullish, of course, and it will remain bullish as long as $SPX holds above support. The highest support level is the 2090-2100 range that $SPX traded in last week.

Equity-only put-call ratios generated their most recent buy signals on February 3rd. Those were well-timed buy signals, and they remain in place. You can see from the charts (Figures 2 & 3) that these ratios continue to drop, and that is bullish for stocks.

Market breadth has not been a particularly strong supporter of the rally, however. It hasn't been completely negative, but it hasn't chimed in with the strength that one would expect to see when $SPX is breaking out to a series of new all-time highs. Regardless, both breadth oscillators remain on buy signals, and both are in modestly overbought territory.

Volatility indices have been declining for the entire month of February. That is bullish for stocks. $VIX remains bullish as long as it continues to close below 17.

In summary, the intermediate-term outlook is bullish, in line with the strength of the most important indicator -- the chart of $SPX. The fact that breadth has not really confirmed the rally is a minor nuisance, but as long as $SPX support is not violated, breadth doesn't matter.

This Market Commentary is an abbreviated version of the commentary featured in The Option Strategist Newsletter.