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By Lawrence G. McMillan

The S&P 500 Index ($SPX) has been bouncing back and forth in a trading range for several weeks now. So, for now, $SPX is trading between 2965 and 3155. A wider trading range could probably be justified as well: 2920 on the downside and 3184 on the upside. 2920 was the top of the April-May trading range, and 3184 would close the gap on the island reversal. Either would be significant for a potential breakout, but until that occurs, we can expect continued volatile price action within the current range.

Equity-only put-call ratios are on sell signals, at least according to the computer analysis programs. You can see from the accompanying charts that they are just sort of edging higher not really reversing upwards with great force.

Market breadth has not been good, but this week it was strong enough to briefly erase the sell signals that were generated last week. But at this time both breadth oscillators are back on sell signals.

Volatility has been a very interesting area, as usual. $VIX has remained rather high throughout this entire rally. As a result, it continues to trade above its 200-day moving average, and that is an intermediate-term negative for the stock market.

In the short-term, though, another $VIX "spike peak" buy signal was generated as of June 29th, and it's been off to a strong start. In fact, almost every time that the market has had one of those strong down days or two, another $VIX spike peak buy signal has been generated and most have been good buying points. In summary, the market has alleviated some of the overbought conditions that existed in early June, but not all. It remains in a trading range, and until there is a breakout above 3184 or below 2920, the "trading range" status will be in effect.

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

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