Stocks (as measured by the $SPX Index) have had plenty of chances to collapse or to rally to new highs. Instead they have done neither, frustrating both bulls and bears.
In looking at the $SPX chart, two things stand out to me: 1) there is still a downtrend in place, from the all-time highs on March 1st, and 2) the support level at 2322 remains untested and thus is important. The equity-only put-call ratios are mixed with the standard ratio being on a buy signal, while the weighted ratio is on a sell.
Market breadth hit a rough patch this week and because of that, both breadth oscillators rolled over to sell signals, despite positive breadth on April 6th.
The volatility complex remains bullish, but there are some signs that things might be changing. First and foremost is the fact that $VIX has not closed above 13.50. That alone keeps the $VIX chart in the bullish camp, for stocks.
In summary, the market is struggling to establish an identity. On Wednesday of this week, $SPX was trading up strongly, only to see a complete negative intraday reversal wipe out the entire rally (it was blamed on comments by Speaker of the House, Paul Ryan, that indicated that tax reform might not come easily and might not come this year. That's a surprise? It took Reagan over five years to pass tax reforms). But, as noted earlier, downside probes, such as the one after the missile attack last night, haven't "stuck" either. As a result, despite what other indicators are saying, we continue to watch for breakouts by $SPX and $VIX as the primary guides as to how new market direction might emerge. Otherwise, the trading range market persists, frustrating most everyone except for option premium sellers.
This Market Commentary is an abbreviated version of the commentary featured in The Option Strategist Newsletter.