Stocks had broken out to new all-time highs (at least for $SPX) in late August. Then, a minor correction saw a pullback and test of the breakout level at 2860-2870. That held, and now the market is once again moving strongly higher. The upside gap breakout (by both $SPX and $DJX Dow Jones Industrials) was a very strong move. If these levels can be held today, then the old highs at 2910 should be a new support level. Below there, the 2860 support level is still in force, as well as major support at 2800.
Equity-only put-call ratios are falling, and that is bullish. Call volume has exploded this week, with yesterday's total call volume being the largest in a rising market since mid-January (there were a few higher-volume days in February, but those came during extreme market selloffs when option volume of all types was huge).
Market breadth has been quite interesting. Even as $SPX rallied from the lows on September 7th, breadth was generally lackluster each day, and the breadth oscillators remained on sell signals. Finally yesterday, on the gap breakout to new highs, the "stocks only" breadth oscillator sell signal was canceled out. But the NYSE-based "breadth oscillator" is still on a sell signal!
$VIX continues to languish at low levels, and that is benign for stocks. As long as it continues to trade (well) below 15, stocks can continue to rise. In Figure 4, you can see that it is back down to 11 roughly its lowest levels since January. That makes it a bit overbought, but overbought does not mean "sell."
In short, we remain bullish until there is some violation of support on the $SPX chart.
This Market Commentary is an abbreviated version of the commentary featured in The Option Strategist Newsletter.