The S&P 500 Index continued its remarkable run this week, notching new all-time highs for the 19th time since the beginning of the year. Momentum remains robust in the market, with the index overcoming resistance at the 5,180 level after a favorable outcome from the FOMC meeting. This level is now expected to act as a strong support, alongside the 5,050 area, which has been tested multiple times in recent trading sessions.
Currently, the S&P 500 is trading near its rising upper “modified Bollinger Bands” (mBB). While there is a potential sell signal in place, it is unlikely to be triggered immediately. A more plausible scenario would involve the index closing above its +4σ Band and then setting up a new sell signal, a process that may take some time to unfold.
Despite a slight uptick in equity-only put-call ratios over the past week, they have not exhibited a significant increase indicative of a valid sell signal. Similarly, market breadth weakened initially in the week, triggering sell signals, but strong positive breadth on March 20 counteracted these signals. However, for a more robust confirmation, breadth ideally needs to become highly positive and move strongly into overbought territory.
New highs on the NYSE continue to outnumber new lows by a wide margin, maintaining a bullish signal that has persisted since January. As long as new lows do not surpass new highs on the NYSE for two consecutive days, this bullish signal remains intact.
The VIX, despite potential catalysts for volatility such as the CPI figures and the FOMC meeting, has remained at low levels. As long as the VIX remains subdued, the outlook for stocks remains positive. While there are no specific VIX signals in place at the moment, the overall picture from VIX continues to support a bullish stance on stocks.
Volatility derivatives, including the term structures of VIX futures and the CBOE Volatility Indices, also maintain a bullish outlook for the stock market, with upward sloping term structures indicating optimism. However, close monitoring of the price relationship between April and May VIX futures is warranted, as a potential sell signal could emerge if April trades above May.
In conclusion, the overall outlook remains bullish, aligned with the upward trajectory of the S&P 500. While closely monitoring for any confirmed sell signals, the current stance is to maintain a core bullish position and trade other signals around it. As of now, there are no confirmed sell signals, reinforcing the bullish sentiment in the market.