The market took a nasty turn downward at the beginning of the week, violating support levels. But that created oversold conditions, and a strong overold rally has followed.
Chart-wise, there is resistance at 2950 and 2980. There is a new support level, at about 2825 (this week's lows), and then below that at 2720-2730, the March and May lows.
Equity-only put-call ratios remain on their well-timed sell signals. They are rising steadily and will remain on those sell signals while that is the case.
Market breadth plunged into very negative territory, making the oscillators oversold. Now they have both generated buy signals in the past couple of days.
In implied volatility, we saw $VIX rise above 17, which puts it in a territory that is negative for stocks. However, the fact that $VIX spiked earlier this week is short-term bullish.
In summary, a mixed picture has emerged. The breakdown through support on the $SPX chart turned that negative, and that is very important as is the fact that put-call ratios remain negative and $VIX is still above 17. But the ferocity of the decline spawned oversold buy signals. Hence, we are maintaining "core" bearish positions, but also trading some of the oversold condition buy signals.
This Market Commentary is an abbreviated version of the commentary featured in The Option Strategist Newsletter.