By Lawrence G. McMillan
The bullish juggernaut was finally slowed a bit this week by the Fed's decision to raise interest rates (or at least, that was the excuse for some profit-taking). However, the chart of $SPX remains very strong, and this is a period of highly bullish seasonality.
Put-call ratios are remaining bullish. Both equity-only put-call ratios are declining daily, although the pace of their decline has slowed over the past two days. Even so, a declining put-call ratio is bullish for stocks.
Breadth weakened considerably this week, and a sell signal has been registered by the NYSE-based breadth oscillator. The "stocks only" breadth oscillator, which has been much stronger since the U.S. election, remains on a buy signal.
The volatility complex has remained quite bullish. $VIX has not risen much this week, and in my opinion, as long as it remains below 15, it is in a benign state so stocks can continue to rise.
Seasonality is bullish at this time of the year as well, especially from the middle of December to Christmas. In summary, most of the indicators remain bullish, but we are seeing a breadth sell signal and some others are close to rolling over. As the bullish seasonality begins to wane, we will change our opinion if sell signals are confirmed, but for now we remain bullish.
This Market Commentary is an abbreviated version of the commentary featured in The Option Strategist Newsletter.
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