By Lawrence G. McMillan
On Monday, January 4th, the new year got off to a rocky start as selling built and exploded into a 90+ point selloff in $SPX. However, the decline bottomed at 3662, and the market has been rallying ever since. That brief selloff seems to have rejuvenated the market, and not only are new all-time highs being made, but they have been accompanied once again by rapidly expanding breadth.
When $SPX bottomed on Monday, it was just above the previously noted support area of 3630 3650. So that entire area is now important support.
Equity-only put-call ratios continue to rise, and thus they are on sell signals. However, we have not acted on these sell signals because they do not appear (to me) to be a change of market opinion but rather are just a "reversion" to the mean because the ratios were so low on their charts.
Both breadth oscillators are now back on buy signals and are moving quickly into deeper overbought territory. That is a good thing when $SPX is breaking out to new all-time highs, as it is now.
Volatility is remaining mostly bullish as well. A new "spike peak" buy signal was generated on January 5th.
We remain bullish on the market and are going to continue to maintain long positions tightening stops and rolling up where appropriate.
This Market Commentary is an abbreviated version of the commentary featured in The Option Strategist Newsletter.
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