All of the major averages have made new all-time highs this week: $SPX (SPY), $DJX (DIA), $NDX (QQQ), and yes, even $RUT(IWM). In fact, IWM is outperforming the rest at this time, for the first time in a long while.
$SPX has support at 3644 (the highs of Monday, November 9th when Pfizer announced that they had a vaccine), and that has been tested several times. A close below there would be a bit negative, but that is merely where the rising 20-day moving average is ($SPX has not even touched that MA since November 4th). Below there, support exists at 3550, and that is the one that seems to be more important. A close below there would turn the $SPX chart negative.
Equity-only put-call ratios remain on buy signals, as they continue to decline. The standard ratio has now fallen below last September's lows and is at the lowest levels since February 2000. In essence, the call buying mania continues, and that has made these indicators very overbought, but they will not generate sell signals until they roll over and begin to rise.
Breadth continues to be a very positive factor for the market. Both breadth oscillators remain on buy signals and are in modestly overbought territory -- which is fine for a market at new all-time highs.
Volatility remains elevated, as there are still worries that are causing traders to buy $SPX puts out into next year. That inflates $VIX, which is still near 22. $VIX is in a downtrend of sorts and that is bullish for stocks.
In summary, we continue to remain bullish in line with our indicators. Despite some severe overbought conditions, the market has not generated any confirmed sell signals. Overbought does not mean "sell."
This Market Commentary is an abbreviated version of the commentary featured in The Option Strategist Newsletter.