By Lawrence G. McMillan

The Standard & Poors 500 Index ($SPX) is now trapped in a very narrow range, between 2700 and 2740. A breakout above 2750 would be very positive, while a break DOWN below 2630 would be very negative. For most of the rest of the indicators, everything is bullish. But as subscribers know, $SPX is the most important indicator.

For example, the put-call ratios are solidly on buy signals as they continue to fall almost daily.

Market breadth was been decent — not terrific, but decent. As a result, both breadth oscillators remain on buy signals in modestly overbought territory.

Volatility remains one of the most bullish indicators we have. Essentially, $VIX has been in downtrend since the end of March (blue line in Figure 4). That is bullish for stocks. Moreover, once $VIX fell back below 15, it has stayed there no matter what. That is also bullish.

In summary, it seems like we’ve been saying the same thing for a while, but the market hasn’t made a strong enough move in order to change anything. This stalemate will end (hopefully) if $SPX can break out over 2750 — a bullish resolution to the ennui — or fall below 2630 (a bearish resolution). But neither the bulls nor the bears have been able to garner momentum when it seemingly is presented to them.

This Market Commentary is an abbreviated version of the commentary featured in The Option Strategist Newsletter.

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