The Standard & Poors 500 ($SPX) chart still shows heavy resistance at 1390.
That level has been challenged on five of the last six trading days. So far it has held,
thus making it a very strong resistance area.
Equity-only put-call ratios remain on sell signals, which originated a week ago. These ratios
are now climbing their charts swiftly, solidifying those previous sell signals.
The breadth indicators that we follow have now turned to buy signals.
Volatility indices ($VIX and $VXO) have not responded with roaring enthusiasm to
this week’s rally attempts. Rather $VIX has held above 18 for the most part
(below that level this morning). Consider the chart of $VIX. It has risen back into
the 17-21 trading range, which previously held sway back in February.
As long as $VIX is in this range, I would expect the market
to be quite volatile, but probably without much definitive direction.
In summary, even though $SPX has retraced its way back to the 1390 resistance level,
only breadth rolled over to a buy signal. I think it is significant that the put-call ratios
and volatility have not improved on this move. Therefore, there is still a reasonable chance
that $SPX will decline to test the strong support at the 1340 level.