By Lawrence. G. McMillan
$SPX touched support and its rising 20-day moving average at 1310, and probed slightly below that level today before rallying.
Perhaps more interesting is the fact that the equity-only put-call ratios have remained on buy signals throughout the pullback over the last week.
There was similar action in the volatility indices ($VIX and $VXO). The calm in these volatility indices is another bullish indication, despite the falling broad market.
Only breadth is giving a negative signal at this time.
The market has spent nearly the entire week in a tight range, frustruating both bulls and bears.
Equity-only put-call ratios have continued to remain on buy signals, despite some occasional heavy put buying during the week.
Market breadth has been strong, for the most part. As a result, breadth remains on a buy signal, too.
Volatility indices ($VIX and $VXO) have drifted down to very low levels. In general, the decline in volatity is bullish for stocks.
$SPX has not made new highs (yet), but it has broken out above the 20-day moving average, the downtrend line from the highs, and the short-term resistance that had developed in the 1300-1320 area.
Equity-only put-call ratios have rolled back over to buy signals, which is a very significant positive intermediate-term development.
Breadth oscillators -- which are the most sensitive indicator of this group -- turned to buy signals over a week ago, and have remained on those buy signals ever since.
The following Market Commentary is an abbreviated version of the commentary featured in The Option Strategist Newsletter.
$SPX fell rather sharply in the days after it made a new high on November 5th, the day of the post-FOMC meeting euphoria. As a result, there is major resistance in the general area of 1220.
The equity-only put-call ratios are once again at odds with each other. The weighted ratio is still the one upon which are putting the most weight, and it is on a sell signal.
The breadth indicators have returned to buy signals.
