The broad market ($SPX) has failed to convincingly break out to a new high, and now it is back below the old (early May) highs of 4238. A close below 4190 would indicate to me that the attempted upside breakout had failed.
Despite recent market weakness over the past four days, the equity-only put-call ratios remain on buy signals. The standard ratio (Figure 2) flattened out yesterday, but the weighted ratio continues to drop. These ratios will remain on buy signals as long as they are declining.
One area that has deteriorated badly and is now generating sell signals is market breadth. The breadth oscillators did their best to hold up, but as $SPX made those new all-time highs from June 10th to the 15th, breadth was struggling to keep pace, and then in the last four days, breadth has given way to oscillator sell signals.
So far, volatility has not increased much, and thus the $VIX chart remains bullish for stocks. That would change if $VIX returns to "spiking mode," but it hasn't done so yet.
In summary, we are willing to give the bullish case the benefit of the doubt as long as $SPX continues to close above 4190, although we will trade confirmed signals in either direction. A close below 4190 would necessitate a less bullish stance.
This Market Commentary is an abbreviated version of the commentary featured in The Option Strategist Newsletter.