The pullback in $SPX is disappointing in light of the buy signals that were in place. The only bullish thing remaining about the $SPX chart is the support at 1040. If that gives way, it would be extremely bearish.





Equity-only put-call ratios, however, have remained quite bullish all along. Both ratios generated buy signals in early June, and those remain in effect today.




However, market breadth has been poor. Even when the market was rallying, breadth did not expand in a strong way. Now, with this week's decline, breadth indicators have returned to sell signals.




Technically, the $VIX chart is still in a downtrend and can still be considered bullish for stocks.




In summary, it was disconcerting to see that the market couldn't do more with the upside breakout and buy signals from the complete
set of indicators. At this point, a breakdown below the 1040 area would be quite negative.


Lawrence G. McMillan is the author of two best selling books on options, including Options as a Strategic Investment, recognized as essential resources for any serious option trader's library.