Thursday, January 7th, 2010
The $SPX chart continues to be positive, as the index remains
above its intermediate-term trend line, dating back to the March
bottom. The nearest support is at 1115 -- the lows of the selling on the
last trading day of 2009. Below that, support at 1100 and then 1085
are important, too.
The equity-only put-call ratios, which were ineffective for a long
time, seem to be back in synch. They remain on buy signals.
Market breadth has been steadily positive, although not
spectacularly so. However, since breadth is overbought, the possibility of a
sharp, but short-lived correction is possible at any time.
Volatility indices ($VIX and $VXO) have made new lows,
trading at prices last seen in August of 2008. The downtrend in $VIX
continues (see Figure 4), and that is bullish for the stock market.
In summary, the chart of $SPX is bullish, and the technical
indicators support that case. Yes, there are overbought conditions, and
we would expect a sharp, but short-lived correction soon. However,
unless certain factors change, the bulls remain in charge.
McMillan Analysis Corporation
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