With the Dow ($DJX) making new all-time highs, and the Standard &
Poors 500 Index ($SPX) simultaneously making new post-2007 highs,
it certainly seems that higher prices lie ahead.
Both of the equity-only put-call ratios are somewhat distorted.
That is because of all the put buying that has been taking place as
protection for stock portfolios. At the current time, they are moving
lower and thus appear to be back on buy signals.
Market breadth (advances minus declines) has remained positive.
Thus, the breadth indicators are on buy signals.
Volatility indices ($VIX and $VXO) have been quite reliable
indicators and they are also in a bullish mode, which is fine as
long as $VIX remains below 15.
In summary, the market has made new highs, and that alone is
enough reason to be bullish. By far the most bullish indicators are the
price charts of the major indices. There is nothing wrong with that, per
se, but if the other indicators don’t improve as prices continue to rise,
it would be quite easy for them to turn negative quickly if a stock
market correction should develop.
I would not be surprised to see a modest stock market correction —
should one get underway — quickly turn to something more nasty.