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By Lawrence G. McMillan

A week ago, it appeared that $SPX had a chance to challenge its old highs. But subsequently selling has dashed those hopes at least temporarily, and now the question is whether support near 4420 will hold. A move above 4637 (last week's highs) would justify a bullish stance, while a move below 4420 would justify a bearish stance.

Our most bullish indicators remain the equity-only put-call ratios, which are still on strong buy signals. They peaked from extremely high (oversold) levels in mid-March and are in the process of declining rapidly now. The slight wiggle on the standard chart (Figure 2) is meaningless, according to our analysis programs; it remains on a buy signal.

Contrasting that, the breadth oscillators are in poor shape. Breadth had been strong in the late-March rally, but by the time that $SPX backed off this week, it had deteriorated. Both breadth oscillators are now on sell signals.

Meanwhile, there are mixed signals from the volatility indicators. A brand new $VIX "spike peak" buy signal was generated at the close on April 7th.

Contrasting that, though, is the fact that $VIX has once again moved above its 200-day moving average. That means that both $VIX and its 20-day MA are above the 200-day, and that is an intermediate-term sell signal.

Overall, we are treating the current market as somewhat range- bound, looking for a breakout above 4637 or a breakdown below 4420 as an area to add bullish or bearish positions, respectively.

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

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