The fact that the S&P 500 (SPX) broke over the downtrend line that had existed for most of February and March doesn't necessarily mean that the SPX chart is outright bullish, though, for there is formidable resistance at both 4200 and 4300, says Lawrence McMillan of Option Strategist.

It's just not a bearish chart right now. Several indicators are overbought at this time, and some of them might be issuing sell signals soon. In addition, SPX has advanced above its +3å "modified Bollinger Band."

There is minor support near 4050 with stronger support at 3970 (where the small gaps on the SPX chart would be filled). A close below 3950 would be bearish, though, as it would more or less negate the positive work that was done over the past couple of weeks.

Equity-only put-call ratios remain on buy signals after faltering a bit this week. The ratios turned up modestly for a couple of days but have now moved back down to a new relative low as of yesterday thus solidifying the recent buy signals. The Total put-call ratio remains on a buy signal as well. These indicators will remain bullish for stocks as long the ratios continue to decline.

Breadth, however, has become something of a problem. Breadth was tremendously positive during the rally, with positive breadth on every one of the seven trading days between March 24 and April third. Since then, however, there has been a vast deterioration in breadth, and the breadth oscillators are on the verge of rolling over to sell signals. They would do so if breadth is negative today.

Cboe SPX Volatility Index (VIX) continues to remain at low levels. That means that the "spike peak" and trend of VIX buy signals remain intact. The only potential problem is that VIX is once again at or below 19. Over the past year, that has generally been an oversold condition that has manifested itself in a decline in SPX sometimes minor, sometimes more serious.

Overall, we exited our "core" bearish position when SPX rose above resistance at 4080, simultaneously breaking the downtrend line from February and March. However, the SPX chart is not bullish. Meanwhile, we will continue to trade signals from our individual internal indicators as they arise.

Learn more at The Option Strategist.