By Lawrence G. McMillan
$SPX has broken to new lows for this move, taking out the support at 2437. That means that a test of the 2400 level is likely in the cards. There is resistance at 2480.
Even with the relative negativity of recent movements, it is worth remembering that as long as support at 2400 holds, the $SPX chart will remain positive.
Equity-only put-call ratios have remained bearish since early August. After the buy signals from other indicators early this past week, these put-call ratios were our only remaining bearish indicators. So far, they have proven to be the most correct.
Market breadth seems like it is trying to get on the same page as the market and become a relevant indicator once again. The jury is still out on that. The breadth oscillators are back in oversold conditions, on sell signals. Remember, oversold does not mean "buy."
Volatility continues to be an interesting area of the market. $VIX gave a buy signal on Monday. The budding uptrend on the $VIX chart in Figure 4 would be a negative for the market if it persists.
In summary, the market whipsawed up and back down again taking a lot of traders on both sides out of their positions. With yesterday's close below support, though, we continue to view the short-term as negative. The intermediate-term remains positive.
This Market Commentary is an abbreviated version of the commentary featured in The Option Strategist Newsletter.
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