Today, $SPX clearly broke out through the top of its previous trading range. This augurs for higher prices ahead. It appears that this rally could carry to $SPX 1000-1020, which is the area of the 2008 October-November highs.






The problem with these bullish projections is that the market is extremely overbought -- so overbought, in fact, that if history is any guide, it will stall out here for a while. You may think that sounds almost impossible, for the market to stall after having just broken out, but the same thing most recently happened on June 1, so there is precedent.



Equity-only put-call ratios remain on buy signals that were generated a little over a week ago. The fact that these emanated from relatively low levels on their charts is not significant. As long as they rolled over and are trending down, they are bullish, regardless of the level at which they rolled over.



Volatility indices ($VIX and $VXO) continue to decline and thus remain bullish. $VIX would have to close above 27 before its bullish status were even in doubt at all.



In summary, the upside breakout looks to be an "all clear" for the bulls. And, in line with the 1938 chart, we expect $SPX to now move to its eventual highs above $SPX 1000. However, since the market is so extremely overbought, this move may once again be stalled as the overbought condition is worked off via sharp, but short-lived declines and/or sideways action.

Lawrence G. McMillan is the author of two best selling books on options, including Options as a Strategic Investment, recognized as essential resources for any serious option trader's library.