How many times can $SPX rally into the 1390-1400 area, only to fail again and again? Since the first of this year, $SPX has probed up into that area at least 10 times -- five of them in the last week -- and yet to date there has been no upside breakout over that formidable resistance area.



The $SPX chart is neutral at this point. The overhead resistance is bearish, but the uptrend that has been in place since the March bottom is bullish. So one or the other will have to give way soon, as they are converging on each other. Technically, a close above 1400 would be bullish, while a close below 1330 would indicate a retest of the market's lows.



The equity-only put-call ratios are bullish, as they continue to decline (Figures 2 & 3). This is an important intermediate-term indicator that has been bullish for quite some time. The fact that $SPX can't seem to break out on the upside to confirm the put-call ratios' bullishness is something of a negative divergence. In fact, it's possible that $SPX could continue to stall in this area, while the put-call ratios eventually fall to the lower levels on their charts and generate sell signals.



Market breadth has turned negative again, as another round of sell signals was generated this past Tuesday.

The volatility indices ($VIX and $VXO) continue to decline, and that's bullish. $VIX is currently near 20, and it would have to rise above 23 and perhaps even 24 to reverse the current bullish scenario.



In summary, the signals are mixed, with the equity-only put-call ratios and $VIX chart being bullish, breadth being negative, and $SPX showing overhead resistance. The price movement of $SPX will, of course, be the final arbiter. If the upside breakout occurs, then one must be in long positions.

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.