The most important technical indicator -- the chart of the S&P 500 Index ($SPX) -- remains steadfastly bullish. It has continued to rise, establishing a myriad of support levels while doing so. Since August 28th, there has only been one day that this Index has even closed below its rising 20-day moving average. That is a strong uptrend.
The equity-only put-call ratios are all making new multi-year lows. Not only does this mean they are very overbought, it also means that they are on buy signals. As long as they continue to decline, that is bullish for stocks.
Market breadth has been a weak indicator -- as opposed to the strength shown by call buyers or by $SPX remaining above its 20-day moving average for so long. In fact, even though $SPX has made several new highs this month, the breadth oscillators have remained on sell signals.
This brings us to volatility, which is -- in a word -- bullish (for stocks). The fact that the volatility indices have continued to remain at very low levels is perhaps an overbought condition, but more importantly it means they are in a benign state as far as stocks are concerned.
Finally, one should not overlook the bullish seasonality that exists between now and the second trading day of the new year. In summary, the intermediate-term outlook remains bullish and will continue to do so as long as $SPX is above support and $VIX is bumbling along at low levels.
This Market Commentary is an abbreviated version of the commentary featured in The Option Strategist Newsletter.