The following Market Commentary is an abbreviated version of the commentary featured in The Option Strategist Newsletter.
The major indices have run into resistance. For $SPX, this refers to the 1180-1220 area, which was the April top. If the ensuing correction is merely an overbought correction in an ongoing bull market, it should be limited to support in the 1130-1150 area.
On the other hand, a breakout over 1220 would be very bullish, but it just doesn't seem like the market has the energy for that kind of breakout at this time.
As noted in the feature article, the put-call ratios are mixed, with the standard ratio on a sell signal and the weighted ratio on a buy signal.
Market breadth has deteriorated some lately, and one of the two indicators has generated a sell signal.
Volatility indices ($VIX and $VXO) continue to trend lower or sideways, and that is intermediate-term bullish.
In summary, the intermediate-term indicators are still bullish, but we think the time is ripe for a short-term correction.