Stocks have struggled a bit over the past week, but not to any great extent. Support has held in the 2950-2960 range. That has preserved the bullish gap on the chart that extends down to major support at 2940. If $SPX were to close below 2940, that would be a direction-changer, from bullish to bearish. But so far, it hasn't even been tested.
Despite some deterioration in several indicators over the past week, the put-call ratios remain on buy signals, as their 21-day moving averages continue to decline.
Market breadth has probably seen the worst deterioration of all. As a result, both breadth oscillators are on sell signals now.
Volatility indices have moved a bit higher over the past week, but they are by no means giving sell signals yet. $VIX rose above 17 briefly, even closing at 17.05 one day. But it quickly retreated back below that important level and back below its 200-day Moving Average. As long as $VIX is below 17, stocks can continue to rise.
In summary, this is still a generally negative period, seasonally (late September into October), and this is usually a period of rising volatility as well. But our indicators remain bullish at this time, and only an $SPX move below 2940, accompanied by a $VIX move above 17 would change this bullish picture to a bearish one.
This Market Commentary is an abbreviated version of the commentary featured in The Option Strategist Newsletter.