By Lawrence G. McMillan
Stocks continued to rally early this week, creating some overbought conditions. Since then, the upward momentum has been lost, as the market is undergoing a short-term correction to work those off.
Equity-only put-call ratios remain on buy signals, as they generally have continued to decline.
Market breadth has begun to weaken as well. In recent days, breadth has begun to wane. As a result, the breadth oscillators are barely clinging to buy signals.
Volatility indices have continued to remain at relatively low levels. $VIX traded below 14 briefly, which was about as low as it got last fall before the market sold off. It appears to me that, as long as $VIX is below 17, it is in a benign state for stocks, and thus stocks can still rally.
In summary, there are still no sell signals, but the market has bogged down. A short-lived correction might be able to restore life to the bulls.
This Market Commentary is an abbreviated version of the commentary featured in The Option Strategist Newsletter.
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