The major indices are all enjoying a booming bull move to new all-time highs, including the S&P 500 Index (^SPX), Nasdaq-100 Index, and Russell 2000 Index. This display of strength has occurred in the face of potential geopolitical worries, which indicates that “the market” isn’t too concerned with those, advises Lawrence McMillan, editor of Option Strategist.
The SPX has strong support at 7,000 — the previous all-time high — as well as minor support at 7,125 and 7,050. The equity-only put-call ratios remain solidly bullish in their outlook for stocks. They continue to drop steadily and sharply. As long as they are declining, that is positive for the market.
Breadth has been teetering on the verge of a sell signal, but has not generated a confirmed signal yet. It was within one day of confirming a sell signal, but a very strong breadth day on April 30 prevented that.
So far, the CBOE Volatility Index (^VIX) has remained somewhat elevated, as traders show a modest amount of concern over Iran and other potential problems. Normally, with the SPX at new all-time highs, we would expect the VIX to be near 14 or 15 — or lower. Instead, it has been lingering around its 200-day moving average (currently just above 18), or even higher at times.
That finally appears to be changing, as the VIX has now slipped below 17 for the first time since early February. A declining VIX is bullish for stocks. Continue to roll deeply in-the-money calls up to higher strikes.
