By Lawrence G. McMillan
Bears fumble control of the tape, but the S&amp;P 500 is still range-bound
The S&amp;P 500 index SPX broke down below support at 6,800 - but there has been no follow-through and it looks as though the bears have once again fumbled a chance to take control.
The low reached this week on Dec. 17 was 6,720, so that is a minor support area for now. There is also strong support at 6,500, and it appeared that might come into play with the break below 6,800, but that is doubtful now. There is heavy resistance at 6,900 after several failed attempts to break through there to new all-time highs.
Realized volatility remains somewhat elevated, so the &#34;modified Bollinger bands&#34; are still quite far apart. The red marking on the SPX chart above shows this. There is no volatility band signal in effect at this time.
Our other indicators are mixed, since SPX has spent so much time in a trading range.
Equity-only put-call ratios rolled over to buy signals in the past week, reluctantly. They remain bullish on the stock market, since their peaks have not been exceeded even with some fairly heavy put-buying over the last two days as SPX traded lower. If they moved to new relative highs, that would cancel out the current buy signals.
Market breadth has weakened considerably over the past several days (negative breadth four days in a row), so both breadth oscillators have rolled over to sell signals. These can be short-lived signals, subject to whipsaws, but for now they are bearish on the stock market.
New highs continue to edge out new lows on the NYSE - even over the past two days when selling was heaviest. So this indicator remains bullish. This is partly due to the fact that small caps have been outperforming large caps recently.
The implied volatility complex has mostly remained bullish on the stock market. VIX VIX did not rise much over the past two days, and it has not even reached &#34;spiking&#34; mode (an increase of at least 3.0 points, using closing price, over any three-day or shorter time frame). As a result, the &#34;spike peak&#34; buy signal and the trend of VIX buy signal remain in place at this time. The &#34;spike peak&#34; signal would be stopped out if VIX were to return to &#34;spiking&#34; mode. The trend of VIX buy signal would be stopped out if VIX were to close above its 200-day moving average for two consecutive days.
The construct of volatility derivatives remains bullish on stocks as well. The term structures of the VIX futures and of the Cboe volatility indices continue to slope steeply upward, and there is a rather large premium on the VIX futures. The December VIX futures expired this week, so January is now the front month. We will be carefully watching the price of January versus February. If January VIX futures should trade above February VIX futures, that would be a bearish warning sign for stocks. At the moment that is not a concern, as February is trading well above January.
This is still a seasonally bullish time of the year, although recent market action doesn't seem to reflect that. We are in the second of three bullish seasonal factors which extend through the second trading day of the new year.
The failure of SPX to make a sustained move in either direction indicates that it is still range-bound. Bulls are disappointed that new all-time highs above 6,920 have not been achieved, but bears are disappointed that the break of what seemed to be significant support at 6,800 has basically amounted to nothing. We will continue to take new signals where appropriate and will continue to roll deep in-the-money options.
New recommendation: Potential breakouts
This first part of this recommendation is repeated.  It seems improbable now, but one never knows. If SPX breaks out to all-time highs, we want to add to our bullish positions:
If SPX closes above 6920 for two consecutive days, then buy 1 SPY SPY (Jan. 16) at-the-money call and sell 1 SPY (Jan. 16) call with a striking price 20 points higher.
If this recommendation is established, stop out if SPX closes back below 6,800.
In addition, we are going to take a bearish position if a breakdown occurs.
If SPX closes below 6,720 for even one day, then buy 1 SPY (Jan. 16) at the money put and sell 1 SPY (Jan. 16) put with a striking price 40 points lower.
New recommendation: Straddle buy in Bank of Montreal (BMO)
Occasionally, we find an intermediate-term straddle that is cheap in our opinion, and this is one of them, using June expiration.
Buy 1 BMO (BMO) (June 18) 130 call and buy 1 BMO (June 18) 130 put for a debit of 15.0 or less.
If bought, then roll the calls up if BMO trades at 150 and roll the puts down if BMO trades at 110.  Otherwise, we will exit if the straddle's bid price falls to 5.00 or less.
Follow-up action:
All stops are mental closing stops unless otherwise noted.
We are using a standard rolling procedure for our SPY spreads: in any vertical bull or bear spread, if the underlying hits the short strike, then roll the entire spread. That would be roll up in the case of a call bull spread or roll down in the case of a bear put spread. Stay in the same expiration and keep the distance between the strikes the same unless otherwise instructed.
Also, for outright long options, roll if they become 8 points in-the-money.
Long 1 expiring TSEM  (TSEM) (Dec. 19) 115 call and short 1 TSEM (Dec. 19) 130 call: Roll the whole spread out to Jan. 16 expiration, keeping the strikes the same. continue to hold without a stop for now. Roll up at 130.
Long 1 SPY (Dec. 26) 679 call and short 1 SPY (Dec. 26) 699 call: This is the &#34;spike peak&#34; buy signal position. The original spread was rolled up when SPY traded at 679. It will be held for 22 trading days. Stop this position out if VIX rises at least 3.0 points over any three-day or shorter time horizon, using closing prices.
Long 2 IWM IWM (Jan. 9) 256 calls: This is our post-Thanksgiving seasonal trade. Roll the calls up at 262. There is no downside stop, so the entire initial debit is at risk.
Long 3 SLV SLV (Jan. 16) 48 calls: We will hold these calls as long as the weighted put-call ratio buy signal remains intact.
Long 1 GLD GLD (Jan. 16) 390 call and short 1 GLD (Jan. 16) 415 call: We will continue to hold as long as the put-call ratio remains on a buy signal.
Long 1 SPY (Jan. 9) 685 call and short 1 SPY (Jan. 9) 700 call: This position would be stopped out if VIX were to close above its 200-day moving average for two consecutive days.
All stops are mental closing stops unless otherwise noted.
Send questions to: lmcmillan@optionstrategist.com.
Lawrence G. McMillan is president of McMillan Analysis, a registered investment and commodity trading advisor. McMillan may hold positions in securities recommended in this report, both personally and in client accounts. He is an experienced trader and money manager and is the author of the book, &#34;Options as a Strategic Investment.&#34; www.optionstrategist.com
(c) McMillan Analysis Corporation is registered with the SEC as an investment advisor and with the CFTC as a commodity trading advisor. The information in this newsletter has been carefully compiled from sources believed to be reliable, but accuracy and completeness are not guaranteed. The officers or directors of McMillan Analysis Corporation, or accounts managed by such persons may have positions in the securities recommended in the advisory.
-Lawrence G. McMillan
This content was created by MarketWatch, which is operated by Dow Jones &amp; Co. MarketWatch is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
12-18-25 1501ET

<p>The S&P 500 index remains range-bound, with support at 6,720 and resistance at 6,900. Market indicators are mixed, with some bullish signals from put-call ratios and volatility derivatives, while market breadth shows bearish signals. Seasonal factors are bullish, but recent market actions don't reflect this. Recommendations include potential bullish positions if SPX breaks above 6,920 and bearish positions if it falls below 6,720. A straddle buy in Bank of Montreal is also suggested.</p>

The stock market right now is poised for a breakout - or a breakup