The broad market remains overbought, but bullish.  This week, on more than one occasion, it looked like the market was going to experience a correction, but nothing was really forthcoming.  To a certain extent, that might have more to do with option expiration than anything else. In any case, there are no confirmed sell signals, so the major trend remains upward.

$SPX broke out on the upside, penetrating through the upper portion of its channel.  That was "too much," and the market has struggled since doing that.  However, it hasn't really corrected.   Rather, it's gone sideways.  A true correction would probably take it down towards the bottom of the trading range, which is near the 1340 support level.  While a 25-point correction would likely be painful for some, it would essentially set the stage for a further intermediate-term advance.

The equity-only put-call ratios have become more bullish, which is positive for the intermediate term.  The weighted ratio finally made a new post-July low, and the standard ratio is not far behind.  This is confirmation of the buy signal and of the bullish trend of these ratios.  As long as they continue to decline, that is intermediate-term bullish for the broad market.

As has been the case for some time, the overbought nature of this advance is reflected in the short-term indicators -- market breadth and volatility indices.  Breadth had expanded to extremely positive levels. On the one hand, this is positive, for it indicates that the rally is broad.  But it also indicates that things have gotten very overbought, and so a correction is due.

Volatility indices ($VIX and $VXO) both closed below 11 today. That's about as low as they get.  Even though the market can continue to advance while these volatility indices remain low, it is a sign of overconfidence and complacency.  Specifically, put sellers have no fear in this market.  That's a dangerous condition, which is usually met with a rather sharp, but often short-lived correction.

The market has stalled, making one suspicious that next week could finally bring the overbought correction.  At this point, though, we'd suspect that it would -- at worst -- just be a correction to the lower end of $SPX trading range (near 1340 or so).  Our intermediate-term bullish outlook remains in place until some confirmed sell signals arise in our technical indicators -- something that has not occurred thus far.

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