$SPX has finally broken down below support. A serious bout of selling occurred yesterday (February 25th), demonstrating for the first time since last September that the bears might actually have some gumption.
Below current levels, there is support at 3700 (the late January lows) and then the major support at 3630 (the Decembers lows). If $SPX falls below 3630, that would be a major bearish development and would probably indicate that we are in a bear market.
Despite making new all-time intraday and/or closing highs on February 10th, 12th, and 16th, $SPX is in a fairly tight trading range between 3900 and 3950 -- and has been since the breakout to new highs on February 5th. One thing that has come from this action is that the support at 3870 (the January highs) to 3900 has been strengthened.
The major indices ($SPX, $NDX, $DJX, and $RUT) all made new all-time intraday and closing highs this week. $SPX should have support at the previous all-time highs (which were also the December highs) near 3870. Below that, there is obvious support at 3700 (the January lows and the bottom of that brief selloff at the end of January), and then the important support level at 3630 (the December lows). I am still classifying the 3630 level as the most important of these because a) the $SPX chart would take on a negative slant if that level were broken and b) there is an old adage (and adequate proof) that breaking the previous December's lows can be the onset of a bear market.
What a difference a week makes. Just one week ago, $SPX had sold off sharply, but then the bulls said "enough." Institutional cash, which is often deployed heavily at the end of January and the beginning of February, came rushing into the market. In just four trading days, $SPX had recovered all of the losses and had closed at a new all- time high. $SPX bottomed out almost right at 3700 on Friday, January 29th, so that is definitely support. There is also support below that, at 3630. That is the one that I consider more important, because a breach of that level would take the market below its December lows usually the sign of an emerging bear market.
Equity-only put-call ratios are exhibiting some unusual behavior: the two ratios are diver ging. The standard ratio (Figure 2) is plunging to new lows and is thus on a buy signal. The weighted ratio is slowly rising and is thus somewhat bearish.