The trend remains the most important indicator

By Lawrence G. McMillan

$SPX rallied strong yesterday, bouncing off the support at 1425-1430, and that support was/is bolstered by the rising trendline at the bottom of the trading channel that has defined this bull market since June.  The buying accelerated late in the day, and it seemed as if the bears were capitulating to some extent.   Overnight, S&P futures have been strong again – gaining another 7 points in Globex trading.

Neither of the equity-only put-call ratios was phased by yesterday's action, as they continue to trend sharply upward.  Thus, they remain on sell signals.

Breadth was positive yesterday, but not strong enough to reverse the current sell signals.

Volatility indices ($VIX and $VXO), which have remained bullish through the recent decline were down rather sharply on Monday, especially late in the day.  Thus, $VIX remains low and in a downtrend, and that is bullish for stocks.

In summary, the bulls seized their opportunity strongly yesterday – something the bears have not been able to do for months.  While there are still some bearish signals, they are not relevant as long as $SPX remains in its uptrend and $VIX remains in its downtrend.

This market commentary was taken from this morning's edition of The Daily Strategist Newsletter.