By Lawrence G. McMillan

The recent pattern of the markets has changed slightly. Yes, $SPX is continuing to make new all-time highs almost daily, but now NASDAQ ($NDX; QQQ) is catching up and the Dow ($DJX; DIA) is slowing down.

Almost all of our indicators are on buy signals as well, although a negative divergence in cumulative breadth should serve as a warning sign to avoid complacency. For $SPX, there is support near 3985 -- the level of the all-time highs in March, that was surpassed with the recent gap "up" days in the past week. A violation of 3985 would be a bit disappointing to the bulls but would not turn the $SPX chart negative. Below that is the larger support area at 3850 3870, whence the current leg of this rally launched on March 25th. A violation of that area would be quite negative and would remove the "bullish" status from the $SPX chart.

A positive development has been the new buy signals from the equity-only put-call ratio charts. The weighted ratio was the most significant, as it had risen to the levels from which good buy signals were generated last fall. It is now plunging as call buying has returned with a vengeance in the last few days. As long as these ratios are declining, that is bullish for the stock market.

Both breadth oscillators remain on buy signals, although they have not expanded like we want to see, with $SPX breaking out to new all-time highs.

Volatility has also been a bullish indicator for stocks for pretty much the entire last year, since $VIX peaked in March, 2020. The most recent $VIX "spike peak" buy signal (generated on March 5th, 2021) has "expired". However, we are retaining a long position, with a trailing stop, as long as the $SPX momentum is strong to the upside.

In summary, the indicators are bullish, and a "core" bullish position should be maintained. The largest worry at the current time is the negative divergence in the "stocks only" cumulative breadth indicators -- but that alone is not a sell signal. It is a reason to stay alert and to take confirmed sell signals if they arise, though.

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