The stock market continues its remarkable run, and it continues to look more and more like January 2018 every day. That's bullish news for the short term, but extremely negative news for the intermediate-term.
The $SPX chart has everything a bull could want: higher highs and higher lows, rising trend lines, and rising "modified Bollinger Bands" (mBB). The market is sort of outrunning support at the current time, but there is support at 3210, where prices bottomed out on several days in late December and early January. There should also be support in the 3180-3190 range (where the futures bottomed overnight, the night of the drone strike in Iraq).
Equity-only put-call ratios dropped to new relative lows this past week, reaching new multi-year lows. This made them extremely overbought, and now they have shown a slight inkling of a bottom over the past two days. The computer analysis programs are already grading the weighted ratio as being on a "sell," but the standard ratio is not.
Market breadth has strengthened some recently, and both breadth oscillators remain on buy signals.
That brings us to the subject of volatility. $VIX remains low, although traders seem to be reluctant to let it fall below 12 (long, red horizontal line on the chart in Figure 4). Stocks can continue to rise as long as $VIX remains below 16.
In summary, the trend of the stock market is higher, and we do not have any confirmed sell signals at this time. Hence, we remain bullish. But the overbought conditions are worrisome and so are the comparisons to January 2018.
This Market Commentary is an abbreviated version of the commentary featured in The Option Strategist Newsletter.