After a brief correction at the end of September (60 $SPX points in eight trading days), the bulls have taken charge once again. $SPX and most other broad-based indices made new highs for this rally. $SPX broke out over the resistance at 1080, and that is now the first line of support. Furthermore, there is support at 1040, where the major trend line of this bullish phase is currently; this is the trend line that connects the March and July bottoms.






Market breadth indicators are positive, but slightly overbought.





$VIX is declining at a fairly rapid pace, and that is bullish for the market. $VIX has made new yearly lows several times in the last week.





The only seemingly problem area is the fact that the equity-only put-call ratios are still on sell signals. To the naked eye, it appears that the standard ratio is about to roll over to a buy signal, but so far that is not confirmed.



In summary, we view the recent upside breakout as very positive and look for the next leg of this bullish phase to carry $SPX above 1100 in the short term.


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.