Sell warning: Market flirts again with overbought technicals and VIX, after oversold bounce

The bottom line on this update review of my favorite technical and volatility index ($VIX) charts is that the S&P 500 ($SPX) and stock markets at large are once again flashing a sell warning. This is after the oversold rally which we expected in the latter part of last week, fortunately, bringing the $SPX much closer to hitting the 1229 level that's a Fibonacci .618 retrace of its whole move down from the October 2007 highs. I'm not in the permabear camp that's saying the market's going down to Dow 800 or tracing a huge head-and-shoulders pointing to oblivion. I'm just saying that these charts show that KI$$ investors and swing traders should be prepared by now - or ready to get that way on Monday or early this week - either in cash or defensive, until there's a buy signal from these charts. The next great swing buy may indeed take the market to new (higher) highs. But this isn't the time to buy-and-hold for that hope.

Most of these charts are self-explanatory. On the $SPX you can see the price uptrend parallel channel's midline being tested, and StochRSI backtesting to its zero line. Those are both warnings. The $VIX is testing the lower channel line too. $NYMO is testing a downtrending line. And the bullish percent charts for both $SPX and $NDX have StochRSI levels that did lift from negative but backtesting midlines rather than rising to positive territory. Across all these charts, the message is that the market reserves the potential to surprise to the upside some more. But it needs to do a deeper, more serious correction in order to generate new buy signals first.

The Arms Index ($TRIN) at bottom shows the springboard to the rally when its 10-day moving average and other MA's were above 1.20. Now they're under that level, and the value plus the 3-day MA are below 0.80. Not a ripe long-term sell signal in its own right, but getting close and can support a decline even at these levels.