By Lawrence G. McMillan

Despite making new all-time intraday and/or closing highs on February 10th, 12th, and 16th, $SPX is in a fairly tight trading range between 3900 and 3950 -- and has been since the breakout to new highs on February 5th. One thing that has come from this action is that the support at 3870 (the January highs) to 3900 has been strengthened.

As long as that support area holds, it is likely going to be fruitless to try to short the market now, even though it is tempting. Further support levels at 3700 (the late January lows) and 3630 (the December lows) are more important, and if they give way, then the $SPX chart takes on a much more bearish appearance.

Equity-only put-call ratios have continued to remain in a very overbought state, low on their charts. Despite the extreme overbought nature of these charts, they will not be on sell signals until they begin to rise sharply -- see the action of a year ago on the left side of the charts in Figures 2 and 3.

Market breadth has deteriorated rather badly in the last three days. As a result, both breadth oscillators are on sell signals once again.

$VIX remains elevated and its buy signal of January 29th remains in place, and the trend of $VIX is down, in that both $VIX and its 20-day moving average are below the 200-day MA. Those are bullish factors.

In summary, the bullish case is still intact as long as $SPX remains above 3900 -- despite some potentially negative indicators. Thus a "core" bullish position should be maintained, but one should roll call strikes up as they become deeply in-the-money and trailing stops should be raised and monitored.

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