When $SPX broke out above 2740 two weeks ago and then followed that with a breakout over 2790, it seemed that further gains were certain. However, the market has stalled just above the 2800 level. Perhaps it's just regrouping, for most of our indicators are remaining positive, but it's hardly a resounding victory for the bulls (yet).
The upward channel is marked with blue lines on the $SPX chart in Figure 1. The next target would be the top of that channel, which is at 2850 and rising.
"Officially," equity-only put-call ratios remain on sell signals. But the ratios are moving higher and so is the stock market. Hence, things are "out of synch," since they should be moving in opposite directions. This happens rarely, but it does happen.
Market breadth oscillators are on buy signals, but just barely. It wouldn't take much to throw them back into sell status again.
Volatility has had no problem remaining in the bullish camp. On days that the market is up, volatility declines. On days that the market is down, or perhaps gets a blast of negative news which causes a short-term negative reaction, volatility barely rises. As long as $VIX continues to trend flat to lower, that is a positive factor for stocks.
In summary, we remain positive on the market. We have no new sell signals in place, and thus we remain bullish as long as $SPX continues to remain above support at 2740.
This Market Commentary is an abbreviated version of the commentary featured in The Option Strategist Newsletter.