The stock market had just about everything going for it in technical terms this week, but then the fundamentalists delivered a nasty blow today (Thursday, June 21st). Technically $SPX is just below the support level of 1330-1340.

Equity-only put-call ratios remain on buy signals, despite Thursday's large decline. Market breadth was very poor on Thursday. As a result, both breadth oscillators registered sell signals.

Volatility indices ($VIX and $VXO) were the last indicators to turn positive earlier this week. That occurred when $VIX fell below 21 on Monday and then proceeded to drop to 17 by mid-week. As we have been saying for some time, $VIX above 21 is bearish for stocks, while $VIX below 21 is bullish.

In summary, the technical indicators remain bullish, except for breadth. We are going to give the upside the benefit of the doubt. But if $SPX should decline further, or if $VIX should close above 21, or if the put-call ratios should roll over, then we would have to relinquish our currently bullish stance.

Lawrence G. McMillan is the author of two best selling books on options, including Options as a Strategic Investment, and also publishes several option trading newsletters.