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Some deeply mixed signals have arisen in the past week in the stock market.
The basic chart of S&P 500 (SPX) remains in its frustrating trading range, while breadth and put-call ratios generate mixed signals. However, VIX has broken out to the upside, and that has generated some usually reliable sell signals. As we’ve often mentioned in the past, though, any signals without confirmation from SPX are usually not all that successful. Let’s review the entire spectrum of indicators, saving volatility for last.
SPX continues to remain within the bounds of the March price range – support at 2322 on the downside and ultimate resistance at 2400 (the all-time highs) on the upside. Within that range, though, SPX has been contained in an even tighter trading range of approximately 2340 to 2370 on a closing price basis for several weeks. In fact, using closing prices, the 10-day historical volatility (HV) of SPX is a mere 3.5%. Moreover, the 20-day HV is a paltry 6%, while even the 50-day HV is only 7%. These figures directly relate to the rather dull, trading range environment that has existed for a while now, especially on a closing price basis.