The stock market continues to climb, defying its critics and even mystifying some of its supporters. $SPX made new 6-plus year highs this week, as we had expected. This makes the $SPX chart intermediate-term bullish. There is now support at 1460 and, below that, at 1450. There is also a clear uptrend in effect (see Figure 1). However, the broad market has advanced so fast that it is a bit stretched, and therefore it seems that short-lived, but perhaps sharp, declines are possible. Even so, the market quickly recovered from another bout of potentially negative news from China Wednesday night. This is a strong market.



The equity-only put-call ratios continue to remain on buy signals. They will continue to do so as long as they are declining (Figures 2 and 3). These powerful intermediate-term indicators gave their buy signals about three weeks (near the first of April), at approximately the same time that $SPX was successfully testing the 1410 support level -- a level which is now major support. These put-call ratios will remain bullish until they roll over and begin to trend upward -- something that is not likely to happen soon.



Market breadth has been quite strong, although this week there has been something of a divergence in that the Dow Jones Industrials have advanced, along with $SPX and $OEX, yet breadth has been negative.



Finally, the volatility indices ($VIX and $VXO) have remained subdued, and that is bullish. $VIX has been steadily declining since the market sold off sharply back in early March (Figure 4). The market can continue to rise as long as $VIX continues to languish at these low levels.



In summary, the intermediate-term indicators ($SPX and the equity-only put-call ratios) remain bullish, but the short term indicators (breadth and volatility) are more negative. Hence, there is a chance of a short-lived correction. However, any declines are considered buying opportunities as long as the uptrend in $SPX remains intact.

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.