Violent market movements have followed nearly every piece There are both bearish and bullish signals in place, although the bears are being put to the test today.
$SPX has put in two spike lows this month -- one at 2892 and one at 2855. Those represent support. More important support levels exist near 2825 (the August lows) and 2720-2730 (the March and May lows). Overhead, there was resistance at 2960, which will be taken out this morning. Above there is a rather massive area of condensed trading in September, leading up to resistance at 3020- 3025 (the July and September highs, which are also the all-time highs).
Equity-only put-call ratios remain on sell signals. There has been fairly heavy put buying throughout this month, even though the market has generally been rallying for over a week now.
Breadth has been volatile as well. The "stock only" breadth oscillator just rolled over to a buy signal on October 10th.
$VIX has given a short-term buy signal as well, since it rose and spiked back down again. $VIX is closing below 17, so that is bullish as well, but it would be trouble if $VIX rose back above 17.
In summary, we have been maintaining a "core" bearish position since $SPX broke down below support at the beginning of October. A close above 2990 would change that. Meanwhile, we are also trading the oversold short-term buy signals that have arisen.
This Market Commentary is an abbreviated version of the commentary featured in The Option Strategist Newsletter.