After bouncing off of support at 4370 the week prior (the third time that SPX has found support at that level—meaning it is now extremely important support), SPX rallied to new intraday and all-time highs, says Larry McMillan of Option Strategist.

The NASDAQ-100 (NDX; QQQ) did the same, but the Dow (DJX) has lagged behind. The support levels are marked with red horizontal lines on the chart in Figure 1, but really the only one that matters is 4370. If that is broken, the others might fall soon thereafter. But as long as SPX remains above 4370, it's chart is bullish.

spx

Since the chart of SPX is the most important indicator, this means that a "core" long position should be maintained.

Equity-only put-call ratios are mixed. The standard ratio (Figure 2) is rolling to a buy signal, gradually. The weighted ratio (Figure 3) just made a new relative high, so it remains on a sell signal.

ratio

weighted

Breadth improved dramatically over the four-day trading period beginning with last Friday, August 20. Even so, the oscillators are split, with the "stocks only" being on a sell, while the NYSE oscillator is on a buy signal.

The most recent VIX "spike peak" buy signal occurred just a week ago, on August 20. The trend of VIX is lower as it remains below the declining 200-day moving average, and so does the 20-day MA of VIX. Those are all bullish signs for stocks.

vix

In summary, retain a "core" long position because of the positive nature of the SPX chart. If support at 4370 is broken, that would be a big negative. Meanwhile, confirmed signals in both directions can be traded around that "core" position.

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