Stocks have tried to find a catalyst to spur them in one direction or the other, but they have been unable to do so.

In early September, it was the fear of a Fed rate rise that caused stocks to gap down for a couple of days. Then when the Fed kept rates unchanged, the following rally seemed strong for a couple of days as well. But in reality, the S&P 500 Index didn’t go much of anywhere. Late in the month, there was a scare that Deutsche Bank is in trouble, and that caused some heavy selling last week, but it is unlikely to have much follow-through either.

Many traders are looking for the “magic” catalyst to get this market to move. But the fact remains that the SPX is trapped in another trading range — just above the trading range that had held it in check for months, if not years, prior to the post-Brexit breakout to new highs. It doesn’t really matter why this is happening (Stagnant economy? Stocks are over-owned? Too much buying of protection?). It only matters that directional strategies are not going to do very well until the SPX breaks out of this range.

There is strong support at 2120, and it might be tested again soon. That not only is the level of the September lows (and the June highs), but it is also where the trendline connecting the February and June bottoms comes in at the present time (blue line in accompanying index chart). As for overhead resistance, there is near-term resistance at 2172-2180 — the highs on several days in the last two weeks. Further above that, there is resistance, of course, at the all-time highs near 2195. A clear breakout in either direction should be respected.

This action only reinforces the notion that the SPX is the primary indicator. A couple of times in the past month, we have seen the other indicators line up in a bullish or bearish formation, only to see the SPX fail to confirm them.

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The equity-only put/call ratios continue to be mixed in their outlook, although the charts are not all that different. The signals arise from the computer programs that we use to analyze these charts. The standard ratio has been on a buy signal for over a week, while the weighted ratio remains on a sell signal — at least according to the computer. In a larger sense, both ratios are off their lows (bearish), but are stalled near the bottom of their charts (somewhat bullish). As with many indicators, they tend to lose their definition when the SPX remains in a narrow trading range for a long period of time.

Market breadth has been swinging back and forth quite strongly. Almost every day sees more than 1,000 net declines or advances — and more than 2,000 on many days. This has resulted in multiple signals — buy, then sell, and buy again. Currently, the two breadth oscillators that we follow are split in their outlook. This, too, is an indicator that is having trouble finding definition while the SPX muddles around in this tight trading range.

Volatility indices have mostly declined since their early September peak. However, traders are beginning to show some nervousness. For example, the VIX probed above 15 briefly on the last two trading days. But it fell back as prices recovered near days’ end. We continue to view 15 as a sort of demarcation line between bullish and bearish (for stocks). If the VIX closes above 15, it is in danger of establishing an uptrend, and that is a sell signal for stocks. That will certainly happen if the SPX falls below 2120.

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The construct of the VIX futures and of the CBOE Volatility Indices remains bullish, though. This is a way of measuring the long-term pulse of the market, and it is positive. The VIX futures all continue to trade at premiums to VIX (albeit slightly smaller premiums than a week or two ago), and the term structures of both entities continue to slope upward. These are bullish signals for the longer term, indicating that any decline at this point would be viewed as a mere correction for stocks.

Until the SPX breaks out of the 2120-2195 area, expect mixed signals from the indicators and a directionless market. But a breakout from that range can and should be traded.

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