Earlier this week, a strong upside breakout was accompanied by generally positive technical indicators. But worries over the unemployment report have upset things somewhat. I'm not sure how the positive technicals got hijacked by the negative media and fundamentalist attitude about one economic number, but they did.

$SPX has pulled all the way back to the 1390 support level. There is resistance at 1415-1420 and support at 1358. The equity-only put-call ratios remain on sell signals. Breadth indicators have turned negative as well.

Volatility indices ($VIX and $VXO) present a more positive picture. $VIX dropped below 17 when $SPX broke out, and $VIX has been hovering at or below that level ever since.

In summary, the market now sits right on an inflection point: $SPX 1390. A breakdown below this level, especially on a closing basis, will represent a return to the somewhat volatile trading range environment of April. But if this level holds, then look for another assault on the 1420 resistance. A successful breakout of that level would be extremely bullish.

Lawrence G. McMillan is the author of two best selling books on options, including Options as a Strategic Investment, and also publishes several option trading newsletters.