Weekly Stock Market Commentary 12/4/2020

By Lawrence G. McMillan

Over the past three days, $SPX finally managed to break out to new all-time closing and intraday highs. Thus, the $SPX chart is bullish, as there is no classical resistance -- by definition -- when it is at all-time highs.

$SPX has advanced an astonishing 1,500 points, or 68%, from the March lows. No matter how you interpret that, it does not jibe with the economics caused by COVID-19. But TINA and FOMO are formidable proponents of buying stocks, and they have certainly won the day.

Equity-only put call ratios are continuing to decline and thus remain on buy signals. The amount of call buying that has taken place since the March lows is astounding. So these are overbought, but overbought does not mean sell.

Breadth continues to be very supportive of the bullish case, although it has tapered off a bit this past week, even though $SPX was making new all-time highs. Both breadth oscillators remain on buy signals, in modestly overbought territory.

Volatility is mostly in a bullish mode, as far as the stock market is concerned. $VIX continues to trend lower, and that is positive for $SPX.

In summary, the market is overbought and getting more so almost every day. However, there are no sell signals present, and so we remain bullish. Simply stated, we remain bullish as long as $SPX is above 3500.

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