The market action this week has been quite bearish and, frankly, quite out of character in terms of the indicators, but it may also be a rather severe reaction to the overbought conditions that had built up.
The S&P 500 Index ($SPX) had strong upside momentum a week ago, but ran into resistance very near the April highs.
Equity-only put-call ratios are bullish and have remained bullish even during this week's decline.
Breadth was extremely strong on the way up, and has been extremely negative on the way down
$VIX actually closed below 16 (barely) last week, and once again that was a harbinger of a market selloff. Now $VIX is shooting upward, reaching above 21 today.
In summary, we remain bullish as long as $SPX continues to close above 1300 -- based on the put-call ratio buy signals, at least. A close below there would make us neutral, relegating the index to trading range status.
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