The broad market, as depicted by $SPX, remains in a trading range. On the upside, resistance is evident at the 930-940 area, and it is comprised of several items. These present a formidable barrier to further short-term advances -- at least until the current overbought conditions abate and new buy signals arise. On the downside, there is support at 880.




The equity-only put-call ratios have flirted with sell signals, but only the standard ratio has a confirmed sell signal -- and even it's a bit shaky (see Figure 2). Meanwhile, the weighted ratio has moved lower and established new lows. Thus, it remains on its previous buy signal and has not generated a confirmed sell signal.



Market breadth had finally worked off its overbought condition and generated sell signals last week. However, breadth expanded greatly on Monday's rally, so those sell signals were briefly canceled out before reinstating themselves today. The rally is mature now, so there is a greater chance that the current sell signal will precede a broader market decline.



Volatility indices ($VIX and $VXO) continue to decline, in general, and that means they remain on buy signals. Much has been made on CNBC of the rise in $VIX since yesterday morning's lows, but as you can see from the chart in Figure 4, $VIX is still clearly in a downtrend. $VIX would have to rise above 34, in our opinion, to break the bullish downtrend and potentially generate a sell signal for the broad market.



In summary, $SPX continues to trade within the range 880-940. It appears that resistance at the top of that range is quite formidable, but downside support could be vulnerable.

Lawrence G. McMillan is the author of two best selling books on options, including Options as a Strategic Investment, recognized as essential resources for any serious option trader's library.