**$SPX Update: Mixed Signals as Market Trades Within a Broad Range**

Just a week ago, the outlook for the $SPX appeared bleak. The index had broken down from its trading range of 5560-5650 and swiftly dropped to the 5400 level, signaling bearish momentum. However, following this plunge, an oversold rally kicked in. By mid-week, $SPX was once again testing the 5400 support level. Despite the renewed pressure, buyers came in strong at this critical point, triggering a sharp 230-point rally in just two trading days.

With this rapid recovery, $SPX has now returned to the 5560-5650 trading range, where it hovered for more than two weeks during the latter half of August. This leaves the market at a crossroads, with resistance standing firm at the top of the range (5650) and just above it at the all-time high of 5670. On the flip side, the 5400 level has demonstrated its strength as solid support, having held up twice during recent sell-offs. Another crucial level to watch is 5370 — a close below this point could spell significant trouble for the market.

At the end of the day, the $SPX remains stuck within a fairly wide trading range, with strong support at 5400 and formidable resistance near 5650.

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### **A Closer Look at Market Indicators: A Mixed Bag**

As is often the case when the market is trading in a range, our technical indicators present a mixed picture. Despite the significant rally over the past four days, some bearish signals persist, creating a conflicting view for traders.

#### **Put-Call Ratios Remain Bullish**

The equity-only put-call ratios are still signaling a buy, as they continue to decline despite the recent sell-off in stocks. This pattern is largely driven by two factors:

1. **Significant Numbers Rolling Off the Moving Averages:** Larger values are dropping off the 21-day moving average, which supports a more positive outlook.
2. **Lack of Heavy Put Buying:** Interestingly, put buying was relatively muted during the recent market pullback, suggesting that traders weren’t aggressively hedging against further declines.

#### **Market Breadth Shows a Reversal**

Breadth indicators, which measure the number of advancing versus declining stocks, have swung from extremely negative to extremely positive in a very short period of time. This rapid shift has not only erased previous sell signals but also produced new buy signals. Such quick reversals in breadth are indicative of the volatility and uncertainty currently gripping the market.

#### **$VIX Indicators Send Conflicting Signals**

The $VIX, often referred to as the “fear gauge,” is presenting conflicting signals, which further complicates the market outlook:

– **$VIX “Spike Peak” Buy Signal:** A buy signal was triggered on September 5th, suggesting that volatility may decrease in the near term, which could be bullish for equities.
– **Upward $VIX Trend:** Despite the buy signal, the overall trend of the $VIX remains upward, signaling ongoing uncertainty and serving as a sell signal for stocks.

It’s somewhat fitting that these contradictory $VIX signals are playing out while $SPX is stuck in this wide trading range, as the market appears uncertain and directionless for the time being.

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### **Trading Strategy: Stay Flexible**

In conclusion, the market continues to operate within a broad trading range of 5400 to 5650, with mixed signals from technical indicators. The $SPX has shown strength on the back of its recent rally, but resistance looms at the upper end of the range, and the support levels, though strong, are not immune to pressure.

Given this uncertainty, our approach will be to:

– **Trade Confirmed Signals:** Focus on signals that have clear and strong confirmation before taking positions.
– **Roll Deeply In-The-Money Options:** As part of our risk management strategy, we will roll options that are deeply in-the-money to lock in profits or mitigate losses.

In such a volatile environment, flexibility is key. We will continue to monitor the critical support and resistance levels, as well as any shifts in the technical indicators, to navigate the market’s ups and downs with a steady hand.

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*Disclaimer: This post is for informational purposes only and should not be construed as financial advice. Always do your own research or consult with a professional before making trading decisions.*