By Lawrence G. McMillan
The strong oversold rally that abruptly began on June 1st is still in play. It is slowing down, but the bears have not been able to retake any of the rally's gains. There is resistance at 2940-2950, with support at 2720-2730.
Equity-only put-call ratios remain solidly on their recent buy signals. The TOTAL put-call ratio is on a buy signal, too.
Market breadth has expanded somewhat grudgingly. As a result, only now has the "stocks only" breadth oscillator reached the fringes of an overbought condition. In any case, the breadth oscillators remain on buy signals at this time.
Volatility has not moved much, but that could be a significant statement in its own right. Normally, on a strong rally like this, we'd see $VIX right back down at 13-14 again. Instead, $VIX has held near16, which is not a problem for stocks.
In summary, all of our indicators are on buy signals at the current time, so we are retaining long positions. The most bullish of these are the put-call ratio buy signals. However, problems could easily develop in breadth and even in volatility, so we are remaining alert for signs of change.
This Market Commentary is an abbreviated version of the commentary featured in The Option Strategist Newsletter.
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