After some relatively heavy, but orderly, selling in the past few weeks,
oversold conditions finally reached levels that spawned a sharp
oversold rally. But oversold rallies, while often unexpectedly strong,
are generally short-lived affairs. There is certainly a good chance that
this is the case again this time.
$SPX was able to rally to its declining 20-day moving average.
There is further resistance at 1340.
Equity-only put-call ratios appear to be on the cusp of a buy signal, but if
they make new highs that will reaffirm sell signals.
Market breadth indicators have turned bullish.
Despite the decline in $VIX, which was short-term bullish, as long
as $VIX is above 21, stocks are going to have trouble advanceing.
In summary, we would say that a close above 1340 should be
an “all-clear” buy signal for the broad stock market, if the
intermediate-term indicators have turned bullish by that time. But
as long as $SPX is below 1340, the bears are in charge.