Bulls took charge this past week with a furious rally on strong volume—what turned out to be one of the strongest five-day periods on record, states Larry McMillan of Option Strategist.
This market clearly still belongs to the bulls, and the only confirmation left is a close above 3950 to set off the next leg higher. Equity-only put-call ratios continue to move higher, despite the broad market's big rally. These indicators are thus on sell signals and will continue to be as long as they are rising. Market breadth has been very strong in the past week, and both breadth oscillators are on buy signals.
If the market is to continue on a new leg into all-time high territory, it is imperative that these oscillators get overbought (as they have) and stay there. Volatility has remained one of the more bullish indicators all along. The CBOE SPX Volatility Index (VIX) "spike peak" buy signal of March 4th is still in effect, and the trend of VIX is downward, and that is bullish for stocks.
In summary, since the S&P 500 (SPX) chart is the most important indicator, if it closes above 3950, it's an all-clear for the bulls. If that happens, SPX would have to fall back well into the previous trading range to cancel out that bullish signal.
To learn more about Larry McMillan, visit Option Strategist.
