The market continues to grind higher. This week, the bears thought they had discovered something: sell $SPX when it got up to 1390, for that had developed as a new resistance level. That worked a few times, but Tuesday $SPX blew on through that level ââ,¬â€œ trapping whatever shorts had most recently tried and failed with that new ploy. As a result, the 1380-1390 area should represent yet another, higher support area, with 1360 below that. $SPX remains within its bullish channel. As long as that remains true, the $SPX chart is intermediate-term bullish.

The equity-only put-call ratios have continued to be very bullish. In other words, they continue to decline ââ,¬â€œ and as along as they are declining, the market should be able to rally. They are finally beginning to reach the lower levels of their charts, but that alone is not bearish. These intermediate-term indicators would only become bearish if they roll over and begin to trend higher. That doesnââ,¬â"¢t appear to be in cards anytime soon.

Market breadth (advances minus declines) has been very strong again recently. As a result, market breadth is overbought. This has happened several times since the bottom last July, so it is not an overly worrisome condition. With the market overbought, sharp but short-lived corrections are possible (although we havenââ,¬â"¢t really had much of those lately), but an advancing market that continues to have broad participation (i.e., good breadth) and that keeps working off overbought conditions without needing a large correction to do so, is a healthy market.

Finally, the volatility indices have declined even farther. $VIX traded down to 10.04, an extremely low level, while $VXO dipped below 10. Again, we interpret these lowly levels on $VIX as an overbought condition. But unless $VIX starts to trend higher ââ,¬â€œ rising above 13 or 14, say ââ,¬â€œ then the market should be able to move higher.

The bottom line is that this market continues to rise without getting itself into a dangerously overbought condition. Thus we remain intermediate-term bullish, while acknowledging that a potentially sharp, but short-lived correction could occur.

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.