First and foremost, the most bullish of our indicators is the $SPX chart itself (although some of our other indicators seem to be grudgingly improving as well). The 2400 area has been rock-solid support and until that is broken the $SPX chart will remain bullish.
Equity-only put-call ratios are technically on sell signals, according to the computer analysis programs. However, the weighted ratio (Figure 3) has curled over, so its sell signal is weakening.
Market breadth has been quite positive this week, and that has been enough to roll both breadth oscillators over to buy signals. They continue to flip back and forth between buy and sell signals, mainly because they can’t ever seem to get very oversold or overbought.
Volatility derivatives and indices are in a bullish mode as well. $VIX continues to hover at low levels. We had rather arbitrarily set 13 as the demarcation line for $VIX between bullish and bearish. Last week, when $SPX broke down and closed at 2409, $VIX probed right up to the 13 level, but then backed off. So the $VIX chart is still bullish, and will continue to be as long as $VIX closes below 13.
In summary, the outlook remains bullish. Whether $SPX can move strongly to new highs is up for question, but there is no doubt that the intermediate-term picture is bullish as long as support at 2400 holds.
This Market Commentary is an abbreviated version of the commentary featured in The Option Strategist Newsletter.