By Lawrence G. McMillan
In late June and early July, $SPX staged a strong upside breakout, taking the average to new relative highs (and most other major averages followed). This created the very bullish pattern of higher highs and higher lows on the $SPX chart, after the bottom in early June. As the market made these new relative highs, it became extremely overbought. $SPX has backed off about 50 points since July 3rd, alleviating that overbought condition.
Equity-only put-call ratios remain on buy signals.
Volatility indices ($VIX and $VXO) have not risen much in the market correction over the past week. That is a generally bullish sign.
In summary, the overbought conditions of a week ago are but a memory now, so if the bulls have an opportunity, it should be right in this area.
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