By Lawrence G. McMillan
The stock market has taken on a potentially bearish tone, although all the pieces are still not in place. But now that 1840 level has given way, the bears finally seem to have a chance to really take control of the market for the first time since the fall of 2012. We are not necessarily saying this is a full-fledged bear market, but the intermediate-term outlook is now turning bearish.
Equity-only put-call ratios have remained on sell signals since early March. They were not dissuaded by the $SPX move to new all- time highs.
Market breadth has been volatile. For the record, both breadth indicators are back on sell signals.
Volatility indices ($VIX, $VXO, and $VXST) have still not completely bought into the bearish argument. $VIX has spiked up towards 16 several times, but each time it has closed back lower, and the market has rallied. The bearish signal would come if $VIX closed clearly above 16.
In summary, the breakdown by $SPX is bearish. But it would be much more convincing if it were accompanied by a sell signal in volatility.
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