So we have a sort of standoff developing. It would have a bullish resolution if $SPX could rally to 3184 and close the gap on the island reversal. However, a further break below that support at 2965 would be to the bears' advantage. So, in the short- term we are waiting for a breakout to occur.
The equity-only put-call ratios remain overbought. The standard ratio continues to trade at or near 16-year lows, as both ratios remain on buy signals in overbought territory.
The breadth oscillators have declined sharply in the past two weeks, (swamped by the two 90% down days), and currently both breadth oscillators are on sell signals.
Volatility has been the one area where the market has not been overbought. This isn't a normal market, what with the wild swings from day to day. So, $VIX will likely remain elevated until that process plays out.
From an intermediate-term perspective, the $VIX chart remains negative for stocks as $VIX continues to close above its 200-day moving average. It has been in this negative longer-term mode since February 20th (circle on the chart in Figure 4).
In summary, the market has stalled out recently. In the near-term, the bulls would like to see a close of the gap on the island (a rise to 3184 would do that), while the bears are looking for a breakdown below 2965. From a longer-term perspective, the picture is still one of caution, as the bulls won't fully be in charge until $VIX closes below its 200-day moving average. In fact, if $SPX should fall below 2920 and the equity-only put-call ratio should roll over to sell signals, the bears would be back in charge.
This Market Commentary is an abbreviated version of the commentary featured in The Option Strategist Newsletter.