$SPX has not only violated support, but it has broken its modest uptrend line (red lines on the chart in Figure 1). It also has negated its pattern of higher lows (the two lows that, when connected, made that red trend line on the chart). So the chart is bearish. There are potential support lelves at 2620, 2580 (where the 200-day moving average is), and 2530 (the Feb lows).
At 2530 there is the possibility that bear-killing “W” bottom could form. However, if the 2530 level doesn’t hold, then you’re look at closing the gap from last September at 2460, and you’ll also be looking at a potentially intermediate- to long-term bear market.
Equity-only put-call ratios rolled over to sell signals as of last Monday, March 19th. That was good timing.
Market breadth was negative this week, after both breadth oscillators had rolled over to sell signals late last week. As we noted at the time, in this fast-moving market, these very sensitive breadth oscillators have been good early indicators.
The volatility complex continues to provide an array of interesting indicators. $VIX is spiking higher (although not at a rapid rate, for some reason), and that is a short-term oversold condition.
However, $VIX is now in an uptrend once again. As long as that is the case, it’s an intermediate-term negative for stocks. In summary, the intermediate-term indicators are all negative, and they have generally worsened this week. While there are some short- term oversold conditions, we would not act on them until they generate completed buy signals.
This Market Commentary is an abbreviated version of the commentary featured in The Option Strategist Newsletter.