By Lawrence G. McMillan

Once the market perceived that the "debt ceiling crisis" might not be a crisis after all, it began to rise again. $SPX is right at the top of the trading range and is attempting to break out. Those are very positive things. But before we jump on board with both feet, remember that 1) politicians can't be trusted, and 2) there have been some rather severe false upside breakouts by $SPX in the last couple of years.

A close above 4210 would close the first gap on the $SPX chart (circled area on the chart in Figure 1), and that would be a positive step. In addition, a breakout over 4300 would be very strong evidence for the bullish case.

The internal indicators have been giving mixed signals while $SPX has been tied down in this trading range (4050-4200). The equity-only put-call ratios have been moving more or less sideways for about a week. The standard ratio (Figure 2) is now rated as being on a buy signal, according to the computer analysis programs, but the weighted ratio (Figure 3) is not. Frankly, both charts look similar, and it would not be surprising to see the weighted ratio upgraded to a buy signal soon.

Market breadth has been swinging wildly back and forth. Breadth was so negative for most of the month of May, that the breadth oscillators were on sell signals and in oversold territory as recently as this past Tuesday, May 16th. But a massive positive day of breadth on the 17th and follow-through on the 18th have generated confirmed buy signals from both of the breadth oscillators.

$VIX and its derivatives have been steadfastly bullish throughout the time that $SPX has been in this trading range. $VIX is down below 17 now. The "spike peak" buy signal of early May remains in place. In addition, the trend of $VIX buy signal -- which began in the circled area of Figure 4 in late March -- is intact as well.

In summary, an upside breakout by $SPX would be a positive thing. So, if the breakout occurs, we will join with it, but we want to see a clean two-consecutive-day move above 4210 before getting too excited about the upside.

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