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By Lawrence G. McMillan

The market is still struggling to find direction, as it remains mired in a narrowing trading range. The "outside" parameters are support at 4330 and resistance at 4540. I continue to feel that a move outside of that range will generate significant, tradeable momentum for the broad market. However, $SPX has recently been trading in an even narrower range than that, after having found some support near the 20-day Moving Average, at 4450.

Equity-only put-call ratios continue to be our most negative indicator. At one point this past week, both ratios curled over for a couple of days, and it seemed that buy signals might be forming. But that was proven false when both moved to new relative highs on Wednesday, September 13th.

Market breadth has been somewhat negative, although Thursday, September 14th was a very strong day for breadth. The breadth oscillator sell signals that went into effect in early September are still in place. That's mostly because they never reached an oversold condition that would set up a buy signal.

Volatility-based indicators continue to be more bullish in their stock market outlook than "market internal" indicators are. $VIX continues to hover near the 13-14 area, which as you can see from the chart in Figure 4 is the yearly low. It seems that large traders (i.e., traders of $SPX options) are not willing to let $VIX drop below there. Alternatively stated, they are finding puts cheap enough to purchase at that level, since they still feel the need to protect the downside.

The trend of $VIX buy signal is still in place, and will continue to be as long as $VIX is trading below its 200-day Moving Average (which is at 18 and declining).

We are about to enter a seasonally bearish week (the week after September option "expiration" i.e., after the third Friday of September). Some studies show that this weakness often continues on through the remainder of September and into October.

Overall, though, the indicators are currently quite mixed, which is what one would expect with $SPX wandering in a trading range in a rather directionless manner. We will continue to trade individual indicator's signals if and when they are confirmed.

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

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