$SPX has now climbed slightly above its declining 20-day moving average, and that is where oversold rallies usually die out. Despite the strength of the last week, $SPX has not even exceeded last week's high, much less the more important peak of early December. It is in a downtrend, with a pattern of lower highs and lower lows.

The standard put-call ratio is now on a buy signal and that is one thing that did not accompany the two most recent oversold rallies. The weighted ratio is still on a sell signal.

Market breadth was very strong early last week. As a result, both breadth oscillators remain on buy signals, and they have now entered overbought territory.

Volatility indices traded steadily lower, and this has returned the $VIX chart to a bullish indicator, meaning that $VIX is flat or trending down

In summary, the bulls flexed their muscles once again, moving the market smartly higher from an oversold condition. However, until there is confirmation from the $SPX chart, we are viewing this strength with a jaundiced eye. These oversold rallies can look impressive, but they are short-lived. It will take further progress by $SPX to change our intermediate-term outlook to bullish.

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.