$SPX has broken out to new highs, as have all the other indices. The support is now at 1150 (the old highs). From a merely chart perspective, $SPX measures to a rise to 1210 or further.






Equity-only put-call ratios remain on intermediate-term buy signals, and they are not overbought. This makes them the only indicator that isn't overbought.




Market breadth, on the other hand, is the epitome of "overbought." This much of an overbought condition always results in a rather nasty, if only short-lived decline. It could be as much as 5% in just a couple of days.




Volatility indices ($VIX and $VXO) have made new lows. You can see from the chart in Figure 4 that $VIX gapped down, much as it did in January, near that market top. The downtrend in $VIX is intermediate-term bullish, but the drop below has been too fast recently. In short, $VIX is also reflecting the overbought condition.




After expiration, the possibility increases for a sharp decline in the week after expiration. This decline is likely to be short- lived, but at least it might return the market to a more normal state, in which there are both up days and down days.

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.