By Lawrence G. McMillan
Stocks have generally reacted favorably ever since the oversold "washout" on October 3rd (or maybe you prefer the other one, on October 8th). Those created oversold conditions that have spurred buying, along with somewhat positive news on the China trade front. However, there are a couple of things that keep this chart from being all-out bullish.
The first, of course, is the huge resistance at the double tops at 3025-3030. Those are also the all-time highs for $SPX. The other is the fact that the 20-day moving average is still declining.
Equity-only put-call ratios have remained on sell signals, since there has been relatively heavy put buying even though the broad market has been rallying over the past two weeks.
Market breadth was solidly strong for a while, and both breadth oscillators moved back to buy signals. They have reached modestly overbought territory. However, one strong day of negative breadth could easily roll them back over to sell signals.
Volatility has gotten more bullish as well. First, there is the matter of the $VIX "spike peak" buy signal. Then, $VIX fell back below its now-declining 200-day moving average. That is bullish for stocks.
In summary, the indicators are mostly bullish (still waiting on the put-call ratios), but the $SPX chart remains a cause for concern.
This Market Commentary is an abbreviated version of the commentary featured in The Option Strategist Newsletter.
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