The post-Thanksgiving seasonal period got off to a rousing start perhaps too rousing. The $SPX chart remains positive as long as it holds above support. The first support level is at 2600, which is the recent highs and also near today's (Friday's) lows.
Call buying has been particularly heavy in the past two weeks, on the latest leg upward in this ongoing bull market. That has forced the equity-only put-call ratios down to multi-year lows. Simply stated, these ratios are in extremely overbought territory, but they are still on buy signals as long as they are declining.
Market breadth has not kept pace with this big rally. Breadth has been somewhat wishy-washy all through this year-long rally. It certainly hasn't affected the strength or the stamina of the rally, so it's just something we can note and not get too hung up on. The oscillators will roll over to sell signals on the first day of strongly negative breadth.
Volatility remains low, but there are some movements that we haven't seen for a while. For example, $VIX has risen on each of the last four trading days (i.e., every day this week), even though $SPX has blasted over 50 points higher in that same time.
If $VIX is truly trending higher, that will be negative for stocks. But as long as $VIX CLOSES below 13, it's still bullish for stocks.
In summary, there is a lot going on right now, but the main thing to consider is that the $SPX chart is positive and will remain so unless support levels are broken. The first of these is at 2600 (see Figure 1). Furthermore, the trend of $SPX is strongly higher. It has only closed below its rising 20-day moving average one time since last August! Yes, there are overbought conditions and they are going to produce some short-term sell signals. We will not ignore any signals since one never knows when a change of trend will happen, but for now it certainly appears that any sell signals would only have a short-term effect. The intermediate-term trend is positive as long as the $SPX chart is bullish.
This Market Commentary is an abbreviated version of the commentary featured in The Option Strategist Newsletter.