Opinion: Stock-market ‘internals’ are improving, so stay bullish on

The most recent SPX support level, at 4370, was triply tested and it is strong. But SPX has advanced so much that 4370 is beginning to disappear in the rearview mirror. As for a higher support level, there is tentative support at last week’s lows, near 4470, but it has not been retested.

There is technically a remaining McMillan Volatility Band (MVB) sell signal from early July, but it has had little effect. It would be stopped out if SPX were to close above the +4σ “modified Bollinger Band” (mBB) which is currently at about 4550.

Equity-only put-call ratios have rolled back over and are heading lower. That is bullish for stocks, since a local maximum on the equity-only put-call ratio is a buy signal for the stock market.

The process has been a slow-moving one, though, because of what had been negative internals in the market. That is, a majority of stocks were declining, and traders were buying puts on those – forcing the ratios lower, despite new S&P highs. Now, the situation is resolving itself somewhat, as call buyers of equities have returned, and the ratios are declining. This is some evidence of an improvement in the internals in the overall stock market.

For the record, the computer analysis programs have still not confirmed the buy signal in the weighted ratio – hence, the question mark on that chart.

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