The S&P 500 Index ($SPX) could not hold the attempted break out over resistance at 1120 last week. So far, the pullback from that level has been orderly -- not even retreating to the rising 20-day moving average.
The intermediate-term indicators are still bullish. $SPX is in a general uptrend, above support at 1180-1200, and above its rising 20- day moving average.
The equity-only put-call ratios are both on buy signals again.
Market breadth had reached extremely overbought levels after the news events of last week, so a modest market decline was warranted, and that is what we are seeing now.
Volatility indices (VIX and VXO) have generally continued to decline. A declining trend in volatility is bullish for stocks.
Therefore, we think that the best course is to remain bullish in line with the intermediate-term indicators. But if $SPX closes below its 20-day moving average, then it will time to turn bearish.
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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