By Lawrence G. McMillan

The market has finally stabilized to some extent.  Even though $SPX had wide swings in the past week, there was a net gain over the past five trading days.

There is strong support at 1820 (see Figure 1), because that is where this January's decline halted, and where the declines of April and October 2014 also halted.   A breach of that area would be quite negative.

Equity-only put-call ratios remain on sell signals.  There have been some attempts by the computer analysis programs to call for buy signals, but they have been overwhelmed by the sheer volume of put buying that has been taking place on an almost daily basis.

Market breadth has remained relatively weak. Despite the stabilization in the market, the oscillators have remained on sell signals.  However, Friday's (January 29) strong rally will likely push these indicators over to buy signals, finally.

$VIX has spiked several times, and those are bullish short-term indicators. However, the TREND of $VIX is higher, which is longer-term bearish.

One other thing: the extreme bearishness that I've seen on TV by short- term "analysts" has been almost unprecedented, in my opinion.  They are mostly still calling for a break of the 1820 level.  That may come, but it seems to me that these oversold conditions need to be worked off first.

In summary, we expect a short-term rally to a level above the declining 20- day moving average of $SPX, perhaps to the 1960 level or so. However, unless the intermediate-term indicators begin to improve, we continue to view the intermediate-term as bearish.

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