The market has been frustrating to many over the past two months since new all-time highs were made in early June. But the fact is, the S&P 500 Index (^SPX) has remained in a trading range over that time, remarks Lawrence McMillan, editor of Option Strategist.
Bulls expected another attempt at new highs by now. Bears expected a larger correction given the uncertainties of Iran, interest rates, etc.
Meanwhile, there is currently resistance at 7,580 (July's highs) and then at the all-time highs in the 7,600-7,620 area. Support was broken slightly last week, as SPX probed downward. But there is support at 7,300 or slightly above that level, with further support at the July lows near 7,250.
Internal indicators are generally negative or weakening. For example, the equity-only put-call ratios are on the rise once again, and that is bearish for stocks as long as it persists. Breadth has been even worse over the last week. This has kept the breadth oscillators on sell signals.
The CBOE Volatility Index (^VIX) and its various components tried to edge higher last week. It probed above the 200-day moving average on several occasions, but did not close above there. So, the trend of a VIX buy signal (for stocks) remains in place for now.
In summary, SPX remains trapped in a trading range. There have been some negative developments in the internal indicators, but unless SPX itself actually breaks down, those won't mean much. We will continue to take new confirmed signals as they occur and to roll deeply in-the-money positions.
