The stock market keeps on giving — and investors aren't questioning a good thing

The S&P 500 continues to achieve new all-time highs, with technical analysis indicating persistent upside momentum despite some overbought conditions. While equity-only put-call ratios are at bullish extremes and traditional market breadth is weak, cumulative volume breadth strongly confirms the SPX's ascent. Realized and implied volatility remain low, supporting a bullish market structure, though a potential Modified Bollinger Band (MVB) sell signal could activate if the SPX trades at or below 6,680. The overall market outlook remains positive, with the author recommending continued bullish positioning.

Analysis

The S&P 500 (SPX) continues its ascent, establishing new all-time highs and successfully retesting the 6,700 support level. While a "classic" modified Bollinger Band (mBB) sell signal was generated on October 7, it is not considered actionable; however, a McMillan Volatility Band (MVB) sell signal would activate if SPX trades at or below 6,680. This bullish momentum is strongly confirmed by cumulative volume breadth (CVB) also reaching new all-time highs alongside the SPX.

Despite the SPX's strength, traditional market breadth remains poor, with the NYSE breadth oscillator signaling a sell. Equity-only put-call ratios have dropped to levels not seen since November 2021, indicating an overbought market, though a reversal in these ratios would be required to trigger a sell signal. Realized volatility (HV20) is notably low at 6%, also suggesting an overbought condition, with a rise to 10% posing a potential sell trigger.

Implied volatility (VIX) is similarly low, and the term structures of VIX futures and Cboe volatility indices exhibit a steep upward slope, reinforcing a bullish market structure. The VIX buy signal for stocks remains active, with caution warranted only if VIX closes above its 200-day moving average (just above 19) for two consecutive days. The overall market outlook remains positive, with recommendations for continued bullish positioning.

Key Decisions for Investors

• Monitor the SPX for a break below 6,680, which would trigger a McMillan Volatility Band (MVB) sell signal and warrant consideration of bearish options strategies.
• Acknowledge overbought conditions from low put-call ratios and 6% realized volatility (HV20), but await confirmation from rising ratios or an HV20 increase to 10% before initiating broad market sell positions.
• Maintain bullish exposure in the broad market, particularly through call options, as long as cumulative volume breadth confirms SPX highs and volatility derivatives remain in a bullish configuration.
• Consider specific bearish positions in BXP and CORN based on their respective put-call ratio sell signals, while evaluating bullish opportunities in APH, TSEM, ASTS, and CANE.