By Lawrence G. McMillan

The $SPX chart remains bearish. During the oversold rally that failed at the 2000 level, an upward trend line had developed on the $SPX chart, connecting the daily lows since the 1870 bottom. That trend line was broken decisively this week, as $SPX fell back below its 20-day moving average. For now, the $SPX chart is bearish as long as it remains below the broken trend line (see Figure 1).

Put-call ratios are bullish. Figures 2 & 3 show that both equity-only put-call ratios have rolled over and begun to trend downwards. Those are buy signals.

Market breadth hasn't been terrific, nor has it been terrible. There is a chance that a rally on Friday could generate a breadth buy signal.

Volatility has generally been trendless. $VIX probed below 19 but didn't close there. We continue to feel that a $VIX close below 19 would be bullish for stocks.

In summary, the intermediate-term indicators are still negative (except for put-call ratios), but oversold conditions are springing up, so sharp but short-lived rallies are possible.

This Market Commentary is an abbreviated version of the commentary featured in The Option Strategist Newsletter.