Stock Market Commentary

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

The S&P 500 Index ($SPX) could not hold the attempted break out over resistance at 1120 last week. So far, the pullback from that level has been orderly -- not even retreating to the rising 20-day moving average.

The intermediate-term indicators are still bullish. $SPX is in a general uptrend, above support at 1180-1200, and above its rising 20- day moving average.

The equity-only put-call ratios are both on buy signals again. Market breadth had reached extremely overbought levels after the news events of last week, so a modest market decline was warranted, and that is what we are seeing now.

Volatility indices (VIX and VXO) have generally continued to decline. A declining trend in volatility is bullish for stocks.

Therefore, we think that the best course is to remain bullish in line with the intermediate-term indicators. But if $SPX closes below its 20-day moving average then it will time to turn bearish.