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By Lawrence G. McMillan

On the surface, everything appears fine: $SPX made a new closing all-time high twice this week once after a swift upward reversal off of support near 4370. However, it has not made a new intraday all-time high since July 29th, so in reality it is trapped in a very tight trading range between 4370 and 4430 (the all-time highs) A breakout of this range in either direction should give the Index some short-term momentum.

So, $SPX is closing at new all-time highs, but there are several indicators that are far from confirming that. That means a negative divergence has developed in some areas. The first is in the equity-only put-call ratios. These ratios remain on sell signals, as they continue to climb.

Another area of relative negativity is market breadth. Our breadth oscillators are on buy signals, yes, and have been since July 21st, but they have been very weak during this buy signal. Usually, when $SPX is making new all-time highs, breadth expands accordingly. Not currently, however.

The $VIX "spike peak" buy signalfrom July 20th is still in place. Moreover, the trend of $VIX continues lower. That is, the 200-day .Moving Average is falling. So these are positive signals for the overall stock market.

Overall, we are in much the same situation that we've been in for a while: $SPX is strong, and some of the internals of the marketare weak. So we continue to recommend holding a "core" bullish position as long as $SPX is above support at 4370, and one should trade confirmed sell signals around that bullish "core."

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

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