Perhaps even the SEC was getting bored with the low volatility, so they decided to sue Goldman Sachs (GS) to inject some volatility into the market.

There is short-term resistance on the $SPX chart at 1210, near today's close. A strong breakout over 1210 would likely mean another leg up. There is support at last Monday's lows, near 1185.




Equity-only put-call ratios generated sell signals after the government-induced selling, but those sell signals are now injeopardy with the market's strong recovery since then.




Market breadth was poor during the 2-day selling spree, andthat alleviated the overbought conditions to a certain extent.




Volatility indices ($VIX and $VXO) spiked up during thegovernment-induced selloff, and then spiked right back down again.That created a spike peak buy signal on the $VIX chart, and re-established the downtrend in $VIX as well.




In summary, the intermediate-term picture remains bullish.

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.