Weekly Commentary

The stock market continues to march higher, listening to its own
bullish rhythms and eschewing the potentially bad news that has kept
many investors on the sidelines.

Today’s (Thursday’s) rally has taken $SPX all the way up to the upper band of the
bullish channel that has defined this market since early June. That in
itself is an overbought condition of sorts. Today’s highs also exceed
the late 2008 highs, so the next target is the late 2007 highs, near 1500.


Equity-only put-call ratios are mixed. The standard ratio
is still falling almost every day and thus remains soundly
bullish. On the other hand, the weighted
ratio (see below) has already begun to rise and is thus on a
sell signal.

Market breadth indicators have been modestly positive of late.

As a result, they are on buy signals and are now getting fairly overbought again.

Volatility indices ($VIX and $VXO) have been rather stubbornly
high for much of the last month, but they have now declined sharply and
are bullish for stocks in that they are in a downtrend on their charts.


In summary, we remain bullish, but the odds of a correction are increasing
dramatically with overbought conditions and just plain too much
of a buying spree.

Larry McMillan