Last Monday, the COVID-19 vaccine new caused $SPX to gap up 135 points on Monday's open. That was the largest percentage gap to a new all-time high in history.
As traders know, there's an old adage to "sell the news," especially if there has been anticipatory buying before "the news." And they did, drving $SPX back inside its 3200-3600 trading range.
It still seems that a close above 3588 -- i.e., a close above the highest prices reached in September -- would be an upside breakout and would have follow-through. So that is near-term resistance.
Equity-only put-call ratios have continued to rise slowly this week, even though there was plenty of upside fireworks. The fact is that the ratios were and still are so low on their charts that even a modest put-call ratio daily reading (say, 50) will cause them to rise. That is keeping them on these sell signals.
Breadth has been positive at least positive enough to keep the oscillators on buy signals. However, these oscillators are not deep into overbought territory, so they could reverse downward and back onto sell signals with one or two days of negative breadth. The short-term volatility buy signals remain in effect.
From a more intermediate-term perspective, $VIX remains bullish for stocks as well.
So, the market remains volatile and -- so far -- within its previous trading range, on a closing basis. A breakout to the upside would be worth following. For now, though, we are trading positions from both sides. With COVID worries still bothering the market (and keeping $VIX elevated), there should be opportunities for both bulls and bears.
This Market Commentary is an abbreviated version of the commentary featured in The Option Strategist Newsletter.