By Lawrence G. McMillan
The rally that began last week with the Fed announcing tapering has broken out strongly to new highs. The fact that this occurred during a seasonally bullish period has certainly helped, too. $SPX will remain bullish as long as it holds above support at 1810.
Equity-only put-call ratios are shown Figure 2 & 3. Both are at new lows now, and as such they are both on buy signals (because they are declining) and they are overbought (because they are so low on their charts).
Market breadth has been strong on the breakout. Both breadth indicators are on buy signals and are in overbought territory.
Volatility indices ($VIX and $VXO) have plunged to extremely below 11. These are at overbought levels now, but -- like the put-call ratios and breadth -- they aren't sell signals.
In summary, there are numerous overbought conditions -- from equity-only put-call ratios, breadth, and volatility. Yet, the market can continue to rise while these persist. The outlook is bullish.
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