By Lawrence G. McMillan
The broad stock market continues to plow ahead, as $SPX has made new closing or intraday all-time highs on 10 of the last 14 days, including the last two. Thus, momentum is strong and the $SPX chart remains bullish.
There is a modest support level at 3065 (the early November lows) and a more valid support at 3025-3030 (the previous all-time highs). It would be disappointing for the bulls to see 3025 taken out.
Equity-only put-call ratios are plunging, as call activity has been extremely strong (at least in relationship to put activity). You can see from Figures 2 and 3 that the ratios have now descended to the lowest point on these charts. That means they are extremely overbought, but are NOT yet on sell signals.
So while the put-call ratios might soon prove to be a problem, due to their overbought status, market breadth is already a problem. Both breadth oscillators are on sell signals, and breadth has just been very lackluster.
Our last set of indicators, having to do with volatility, are much more bullish than the ones we've just been discussing. $VIX is staying at low levels, and while that's the case, stocks can rise. As long as $VIX remains below 16, it's not going to be a problem for the stock market.
In summary, the $SPX and $VIX charts are bullish, while other indicators are on or near sell signals, and/or are in very overbought states. That's not as bullish as things were a week or more ago, but it's still bullish.
This Market Commentary is an abbreviated version of the commentary featured in The Option Strategist Newsletter.
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