S&P 500 Breaks Out to Upside But Gaps and Volatility Signal Caution Ahead
-
The S&P 500 has decisively broken out to the upside, signaling a new bullish state. Favorable CPI numbers and short covering have accelerated the rally.
-
The speed of the advance could be a problem, with gaps on the SPX chart that may need to be filled. Most gaps do eventually get filled.
-
Equity-only put-call ratios are on buy signals, which is bullish. Market breadth oscillators are also on buy signals but could swing back to sell signals.
-
The VIX is declining but seems reluctant to drop below 13-14. Volatility derivatives remain in a solidly bullish outlook.
-
With the SPX breakout, we are holding a core bullish position and will trade other confirmed signals around that.