Hello, market enthusiasts!

The market is on fire, with the pace of trading accelerating to new heights. The excitement that has propelled the S&P 500 ($SPX) is now spilling over into small-cap stocks like those in the Russell 2000 Index ($RUT; IWM). This surge in small caps has expanded market breadth, turning a previous negative divergence into a positive one. Cumulative Volume Breadth (CVB) has been hitting new all-time highs alongside $SPX almost every day in July, signaling that this is no longer just a NVIDIA (NVDA)-driven market.

Put-Call Ratios: A Closer Look
Equity-only put-call ratios are hitting new relative lows, levels we haven’t seen since the last bull market ended in late 2021. As shown in Figure 2, during periods like July 2023 or March 2024, these ratios can stay low while the stock market continues its upward trajectory. It’s important to note that while these low levels indicate an overbought condition, they are not a sell signal. A true sell signal will emerge when these ratios begin to rise sharply from their lows.

Improved Market Breadth
The inclusion of small caps has significantly improved market breadth. Both breadth oscillators are currently on buy signals and have finally moved into overbought territory, confirming the strength of the market’s rally.

Volatility and VIX
The $VIX continues to trade at very low levels, supporting the ongoing rise in stock prices. The trend of the $VIX buy signal, generated back in March (highlighted in Figure 4), remains in place. However, caution is warranted if $VIX rises above its 200-day Moving Average, which is currently at 14.40 and starting to decline again.

Our Strategic Stance
We continue to maintain our “core” bullish position, complemented by several other long positions based on buy signals from various indicators. We are also rolling calls up to higher strikes when they get deeply in-the-money, optimizing our returns amidst the ongoing market strength.

Stay tuned for more updates and insights as we navigate these exciting market conditions. Keep riding the wave with us, and happy trading!

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