Despite good strength following the FOMC meeting, the market has to clear two more hurdles before the bulls can claim to be in charge: it has to get by Friday's unemployment report, and it has to overcome resistance at 1220 on $SPX.
Let's begin with the $SPX chart. Notice the positive momentum. Both $SPX and the 20-day moving average continue to rise.
The weighted equity-only put-call ratio continues to be bullish.
Market breadth has turned extremely positive again, after the last two days.
Volatility indices ($VIX and $VXO) finally collapsed this week. The trend of these volatility indices thus continues to be downward, and that is bullish for stocks.
The key to staying out of trouble is to simply watch the $SPX chart. As long as $SPX continues to close above its 20-day moving average, there is no problem. But once it fails, traders should begin to exercise caution. Both last January and April, the market broke down soon or immediately after $SPX closed below the 20-day moving average.
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.
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