By Lawrence G. McMillan

The recent broad description of market action has not changed: it is led by the Dow, dragged down by NASDAQ, and it remains volatile. $SPX is caught in the middle.

Despite some very negative days (especially Tuesday, March 23rd), $SPX has not broken down. It probed below that 3870 level on Thursday, and then all of the markets rebounded. That intraday move on Thursday reached down to 3853, so perhaps we should say that support is roughly 3850 3870.

The equity-only put-call ratios remain on strong sell signals. They continue to rise daily, despite the broad market machinations. The standard ratio remains extremely low on its chart and is thus still in heavily overbought territory. These will remain on sell signals as long as they continue to rise.

Market breadth has been volatile in its own right, and yesterday it reversed a negative trend and generated a new buy signal.

The volatility space has been a much friendlier area for the stock market bulls. The $VIX "spike peak" buy signal of March 4th remains in effect, and the trend of $VIX remains downward.

As much as the bears seemed to have a chance to take charge, they have not done so. The deterioration in the internal indicators only needs confirmation by a breakdown below support by $SPX to usher in a longer-term bearish scenario. But that has not happened. Furthermore, $VIX is in a downtrend. So, unless those two trends change ($SPX up, $VIX down), the bulls remain in charge. Hence, a core long position should be held, and short-term signals can be traded around it.

This Market Commentary is an abbreviated version of the commentary featured in The Option Strategist Newsletter.