The market staged a strong rally on Wednesday of this week, using Intel's (INTC) earnings as a catalyst, but really spurred by strong gains in oil stocks. This rally has shown that the 1330 level is support for $SPX. We already know that 1380-1400 is resistance. So, right now, $SPX continues to be range-bound between those numbers. Any breakout to the upside would be bullish, of course, and would likely be accompanied by massive short covering.  However, we don't really see the technical background for such a rally.



The equity-only put-call ratios continue to be bullish, and have been one of the stalwart bullish indicators since the March bottom. However, there has really been very little progress made by $SPX in several weeks, yet these ratios continue to fall. It is possible that, with enough relatively sideways action in $SPX, these ratios could fall to the point where they would no longer be on buy signals. But that is speculation; the reality is that they are currently bullish.



Market breadth correctly gave a sell signal in late March, the last time $SPX was near the 1390 level. On the subsequent decline to 1330, breadth never got oversold and thus never gave buy signals. That was a bit strange, but it's happened before. Now that $SPX is approaching 1390 again, breadth is expanding. Another round of breadth oscillators sell signals could easily set up if there are few more days of advancing issues -- perhaps as $SPX pokes up towards resistance again.



The volatility indices ($VIX and $VXO) -- especially $VIX have fallen sharply of late. That is bullish, at face value. As long as $VIX is trending lower, the broad market should be able to work its way higher.



In summary, everyone is trying to jump on the bullish bandwagon. Once again, the market seems to be expending a great deal of energy just to get back to resistance. And, if the past is any guide, we expect that resistance to hold. If it doesn't (i.e., if there is an upside breakout), then we'd turn bullish, but not before.

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.