March S&P has been in a one-way trade higher since the July low so there is clearly the feeling in the market that a significant correction is approaching. So far, however, price action has not provided any signal that the market is ready to pull back in any meaningful way.
Current trade over the past week has been mostly sideways but considering that this pattern is developing at the highs, it will likely be viewed as a bullish continuation pattern. This strong price action has resisted the bearish divergences that have developed on daily momentum studies. IFR still believes that the general public has to be more of a buyer into this strength before a confident topping call can be made.
Using the 20-day equity put/call ratio shows that optimism is growing but it's not quite at prior extremes that coincided with significant tops in the index. The first, serious warning sign would be a daily close below recent lows at 1416 for the March contract.
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