Stocks are trying to break out to the upside, but there has not been a very convincing attempt yet. For nearly a month, $SPX has been probing the area of the all time highs (4238) but has been unable to break through. Then yesterday, June 10th, the Index finally sliced on through in strong fashion, quickly rising to almost 4250 in early trading. However, selling appeared almost immediately and drove stocks back down below 4238. $SPX closed at 4239, hardly a convincing upside breakout. If the breakout does not take place, then the possibilities increase that $SPX will retreat to 4060, the bottom end of the trading range.
Equity-only put-call ratios remain on buy signals, which were confirmed just a week ago. There has been heavy call buying this past week (although not yesterday), in line with a resurgence in the social media-hyped stocks, pushed by Wall Street Bets, Reddit, and the like.
Breadth indicators have been strong and bullish. Both breadth oscillators remain on the buy signals which were first issued on May 13th, and they are in modestly overbought territory. If $SPX moves higher into all-time high territory, we would like to see these oscillators get even more overbought, for that would be confirmation of the move.
The entire volatility complex is generally issuing bullish signals for stocks. The $VIX "spike peak" buy signal of May 21st remains in effect, and the trend of $VIX is lower.
In summary, the indicators are strongly bullish. If that can be confirmed with a clear upside breakout by $SPX, new bullish positions should be established. However, if that confirmation does not take place, the bears will take another run at the market.
This Market Commentary is an abbreviated version of the commentary featured in The Option Strategist Newsletter.