Overbought Conditions Have Been Worked Off (SPX)

By Lawrence G. McMillan

Stocks were volatile Wednesday, after the FOMC announcements.  But, in the end, prices ended up about unchanged.  Overnight, though, that changed substantially as a strong rally has unfolded, with S&P futures up 14 points on Globex.  Not much has changed with respect to the individual indicators.  Both equity-only put-call ratios remain on buy signals. $VIX is still below 15, so that is bullish.  Market breadth was modestly positive, leaving the NYSE-based oscillator on a sell signal, but keeping the “stocks only” on a buy (barely).

In summary, we have been saying that the bears needed to take their chance.  They have not.  Now, the overbought conditions of a couple of weeks ago have been worked off with sideways movement to a great extent.  If $SPX can hold onto the new all-time highs that it is going to make on today’s opening, that will be strong bullish confirmation.

This commentary was taken from this morning's edition of The Daily Strategist newsletter. Sign up for a free trial today.