This past Monday, $SPX broke out to new all-time highs, smashing through the resistance area at 2440 in a strong manner. Then, just as abruptly, stocks have fallen since then, declining back into the previous 2415 2440 trading range. Both moves would ordinarily portend bigger moves, but in fact both were duds.

The support levels are still intact for $SPX, as is the 20-day moving average ($SPX hasn't closed below that simple MA for about a month). Support is in the 2415-2420 area, where several selling attempts failed in mid-June. Below that, the very important support area at 2400 is still intact as well. As long as those support levels are in place, the $SPX chart remains bullish.

Both equity-only put-call ratios remain on sell signals. These are pretty much visible to the naked eye, and the computer analysis programs agree on the "sell" rating as well.

Market breadth has remained typically poor. Both breadth oscillators remain on sell signals.

In any case, $VIX remains in a bullish state for stocks. In fact, when the market backed off this week, threatening to make Monday's strong move a false upside breakout, $VIX barely moved higher.

In summary, it's easy to get bogged down with the overbought conditions and sell signals -- and they do present some short-term problems for the market. But the intermediate-term picture remains positive as long as $SPX continues to close above 2415, and especially as long as it closes above 2400.?

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