Despite some negative signs that appeared just before Christmas, the stock market has continued to plow ahead. $SPX pulled back and touched the bottom of its bullish uptrending channel.  That was as far as the pullback went, however, and a strong rally developed from there.  So, once again -- as it has done for the last six months -- $SPX remains well entrenched in that channel.  Until it falls below that support convincingly, we will retain a bullish attitude.

The equity-only put-call ratios are our most bearish indicators at present.  They both rolled over to sell signals  about two weeks ago.  At the current time, these reliable intermediate-term indicators are out of step with the market.  That's unusual, but not unprecedented.  Typically, the ratio rolls over and gets back in synch with the market.

Market breadth was weak when the market was weak, and has been extraordinarily strong this week when the market has rallied.  As such, it is acting as a confirming indicator and not a leading one.

Volatility indices ($VIX) never got too excited about the pre-Christmas decline, as $VIX never closed above 11.50.  With the strong upward move this week, both $VIX and $VXO fell back near 10.

The Santa Claus rally has begun with a strong bullish move.  This year it encompasses the four trading days of this week and the first two trading days of next week.  If the period is bullish -- and it certainly looks like it's going to be this year -- it merely confirms the seasonality of that time period, However, if the period is bearish, it can have implications for next year.

In summary, the simplest approach is the best one for this market: as long as prices continue to climb, there is no reason to abandon the bullish bandwagon.  Admittedly, the bandwagon has become very crowded (when was the last time you saw a bearish analyst on CNBC?), and that makes us nervous.  So be sure to keep tightening your stops, because once the selling begins it will be furious as all the newbie bulls try to squeeze out the exit at the same time.

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.