The bears took advantage of a small window before the "Santa Claus rally" begins to drive $SPX down a bit. Once again, support in the 3630 3650 area has held. We are still viewing 3550 as the more important support area, for if that were broken, then the $SPX chart would take on a bearish aura.
Equity-only put-call ratios continue to decline, and thus they remain on buy signals. They are extremely overbought, but that is not a sell signal.
Market breadth has begun to slip. This was the strongest indicator for the market's most recent rise since the Election. However, this week, on January 22nd, the breadth oscillators rolled over to sell signals. Those were quickly stopped out by an improvement in breadth on January 23rd, but the warning shot has been fired.
Volatility has had some surprises this week. On the 21st, $VIX generated a new "spike peak" buy signal.
In summary, there are lot of cross-currents right now, but no confirmed sell signals at this time. Moreover, there is a new buy signal ($VIX "spike peak"). So, we remain bullish, but will certainly trade sell signals when and if they occur.
This Market Commentary is an abbreviated version of the commentary featured in The Option Strategist Newsletter.