The S&P 500 Index ($SPX) made a new all-time high on May 7th. Since then, a correction has been underway, and there have been several times in the last week when I'm sure that both the bulls and the bears thought they had taken control. There were two rather violent declines, both terminating near the 4060 level, so that is now the first support level. Both of those declines were followed by furious rallies back to the slightly declining 20-day Moving Average. A breakout from the current range should see follow-through in that same direction.
Equity-only put-call ratios remain on sell signals, as there has been enough put buying in general to keep them in a rising state. As long as that is the case, they will remain a bearish indicator.
Breadth has jumped back and forth rapidly, with the volatile market moves over the past 10 days or so. Both breadth oscillators gave buy signals on May 13th, and those buy signals are still intact.
Volatility has seem some wild action in the past week, in terms of $VIX movement. $VIX spiked up to the 28-29 area during the heavy selling of May 12th and 13th. Then it gave a "spike peak" buy signal on May 13th. That signal was stopped out on May 19th, and is in the process of setting up again.
In summary, we have seen several confirmed signals quickly stopped out in recent, volatile, back-and-forth action. That is okay, for a small loss can be recovered. The short-term outlook remains bearish, unless the gap at 4188 is filled. But this is not a bear market, only a correction, unless more serious support levels on $SPX are broken.
This Market Commentary is an abbreviated version of the commentary featured in The Option Strategist Newsletter.