Early this week, $SPX closed at a new relative low, and many of the
indicators appeared to be turning bearish (for example, $VIX closed
above 14). However, prices have rallied since then, and $SPX made
a marginal new all-time high today — both intraday and closing. Is this
probe upwards more effective than the probe downwards was a few
days ago? It’s hard to say, but a further close at new highs
would solidify an upside breakout.
Equity-only put-call ratios have turned negative. The standard
ratio (Figure 2) has clearly begun to rise, and that is definitely a sell
signal. However, the weighted ratio’s sell signal is questionable.
Market breadth have reversed direction, and are on buy signals now.
Volatility indices ($VXST, $VIX, $VXV, and $VXMT) probed
above 14 a few times, even as recently as Wednesday.
Since then, volatility indices have retreated and thus
are in neutral-to-bullish territory.
In summary, another close Friday at a new high would constitute
a bullish upside breakout, despite the fact that there are sell signals
from the put-call ratios. Should that bullish breakout fail to
materialize, we would remain neutral unless $SPX broke down below