The broad stock market, as measured by theStandard and Poors 500 Index ($SPX)continues to make new highs almost everyday. $SPX finally moved above its 2007intraday highs, and so it (and the Dow –$DJX) are trading at prices never seen before. As we review the indicators, it is clear that this is the most bullish of them all. At the current time, the other indicators are not all bearish, but they are just not as bullish as $SPX.
$SPX clearly established 1540 as a major support level, as it has rallied strongly and sharply off that level in the last month. In addition, there should be support at the old highs, in the 1560-1570 range. Since $SPX has never been this high before, there is no resistance in the classical sense (resistance is an area where there has been previous selling). But sometimes round numbers induce selling, and we are near $SPX 1600, while Dow 15,000 is not far away.
Equity-only put-call ratios continue to be heavily distorted by protective put buying.
Market breadth has been rather weak for some time now, but are modestly overbought once again.
Volatility indices ($VIX and $VXO) have painted a bullish picture as well. $VIX once again spiked up (last Friday), and then spiked right down again,generating another short term buy signal
All the upward probes by $VIX in the last month or more have been very brief affairs, and thus it has remained bullish by constantly closing below 14. To turn bearish, $VIX would have to exceed the recent highs and close there, and then continue higher – to establish an uptrend.
The construct of the $VIX futures remains bullish, too.
In summary, we are beginning to see some important overbought indicators. However, stock buyers are emboldened by what they perceive as a low- or no-risk situation that the Fed has created. Of course, not even the Fed can hold the market up forever. For now, though, we remain bullish as long as the chart of $SPX is bullish. At a minimum, it would have to close below 1560 to create some doubt on its chart.