By Lawrence G. McMillan
The oversold rally that began with an intraday reversal on March 20th has regained steam and has risen above the 20-day Moving Average, as is typucal for an oversold rally.
For the record, there is resistance in the 2850-2900 area, even though support and resistance have meant much to this fast-moving market.
Equity-only put-call ratios are on buy signals. The current buy signals occurred right near the lows, on March 23rd and will remain in effect as long as the ratios are declining.
Market breadth has exploded to the upside as this rally produced two more "90% up days" in the past week. The breadth oscillators remain on buy signals and are now in overbought territory.
Volatility remains important, but is giving somewhat mixed signals. The $VIX spike peak buy signal of March 17th (which was clearly premature) remains in effect. However, the intermediate-term outlook from $VIX is still bearish for stocks as long as $VIX continues to close above its 200-day Moving Average.
In summary, we are maintaining a "core" bearish position, but will still trade buy signals around it. Raise trailing stops and roll long call strikes up as the rally continues.
This Market Commentary is an abbreviated version of the commentary featured in The Option Strategist Newsletter.
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