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By Lawrence G. McMillan

Stocks have continued to push higher, setting up a challenge of the major resistance at 2800-2820. A lot of people are watching that area with some apprehension (as are we), so if $SPX breaks out above 2820, it should generate strong buying from technicians. That sort of breakout would turn the $SPX chart bullish. But, for now, it remains in a "bearish" state, because any failure of this amazingly strong rally below 2800 would just be another "lower high" on the chart.

Equity-only put-call ratios are bullish, in that they are continuing to decline. The computer analysis programs give only a very small probability that these ratios will roll over to sell signals anytime soon.

Market breadth continues to be spectacular. The breadth oscillators are on buy signals and continue to remain in very overbought territory. That's a good thing, as long as it lasts.

Volatility has continued to decline, slowly. $VIX is back down to 14 and in a downtrend. Those are bullish statistics for the stock market. It is interesting to note, though, that the 200-day moving average of $VIX (see Figure 4) is still moving sideways, more or less.

In summary, the market remains bullish in the near-term, since there are no sell signals. Yes, there are overbought conditions, and the market swiftly turned negative last year in late January and early October, without a lot of warning -- but there were SOME warnings and divergences. None of that exists now. For now, though, remain long -- while tightening stops and rolling calls up to higher strikes, but it appears to be too early to go short.

This Market Commentary is an abbreviated version of the commentary featured in The Option Strategist Newsletter.

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