First, the number of stocks currently above their 20-day moving averages is extremely low (<10%). Usually over the past 20 years, such readings signal intermediate term lows in the market (see second chart). In any case, these are rare events and should be monitored closely.
Second, VIX spiked to above 50 intraday on Monday, and has since fallen back to the mid-20s. This is a 21 day buy signal also, according to McMillan. However, until VXST closes below VIX, I am not going to call the next bullish phase of the SPX.
With McMillan's 21-day Put/Call Ratio averages curling higher from the lowest levels in years, a more bearish picture for the markets emerges. Until they roll back lower, the market could move sideways or even further down.
Also, the SKEW is still high, and actually closed at nearly 137 today. Traders are still buying loads of protection. SKEW readings for a new bull market need to come in below 120, or even better, below 115. Readings above 130 do not provide comfort that the bears are willing to give in.
While the market seems in a position to bounce back after two strong days of selling, everything is not yet bullish. Markets that have rallied are not the usual leaders, instead defense contractors and and industrial conglomerates rebounded recently.
