Once again, $SPX has traversed the 2825 to 2950 range twice in the past week. First, it fell nearly the entire length of the range in one day (August 23rd) and then has come all the way back to the top of the range in the remaining four days. A breakout above 2950 would be bullish, but a breakdown below 2825 would be very bearish.
In a somewhat major new development, both equity-only put-call ratios have rolled over to buy signals in the last two days.
Market breadth has been extreme almost every day. The most recent development is that both breadth oscillators are on buy signals, and in overbought territory.
The short-term interpretation of the $VIX chart is bullish because of all the recent "spike peaks." However, the intermediate-term interpretation of the $VIX chart is more negative. The 20-day Moving Average of $VIX has crossed above the 200-day MA, and $VIX is above the 200-day MA. That is a combination that spells an uptrend for $VIX, which is negative for stocks. This would be negated if $VIX closed below 17 once again.
In summary, the indicators have improved. But experience has taught us that there are times when nearly all other indicators are on buy signals, but the $SPX chart must confirm them, else the market will retreat once again. So, with $SPX near the top of its trading range, we are remaining negative in line with the $SPX chart, but would reverse that position on a close above 2950 by $SPX.
This Market Commentary is an abbreviated version of the commentary featured in The Option Strategist Newsletter.