By Lawrence G. McMillan

The broad market, as measured by the S&P 500 Index ($SPX) has continued to rise, making new all-time intraday or closing highs on six consecutive recent trading days, culminating (so far) with November 19th. This move has not been reflected in some of the technical indicators, however, and so there are some divergences, sell signals, and extremely overbought conditions arising.

For now, though, the $SPX chart is positive. There are higher highs and higher lows, accompanied by strongly advancing trend lines. There is minor support in the 3065-3070 area, with strong support at 3025-3030 (the area of the previous highs).

Equity-only ratios continue to decline, as call buying has remained heavy and steady. These ratios are at their lowest levels in over a year and are thus very overbought but still bullish.

Market breadth has been our most negative indicator. Both breadth oscillators rolled over to sell signals recently.

So, the above paragraphs have laid out some pretty negative data, from extremely overbought put-call ratios to sell signals in mBB and breadth. But the one area that is not turning negative is volatility. $VIX remains at low levels and hasn’t even peeked its head up on recent down days. As long as that is the case, it’s bullish for stocks.

In summary, short-term bearish positions are in order, but the intermediate-term remains positive as long as the $SPX and $VIX charts continue to remain in the bullish camp.

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

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