My indicators are giving neutral to bearish readings. But, from a technical analysis point of view, the stock market is still stuck in a tight trading range, which I project it will stay in for at least the short-term. Keep in mind, though, that the longer and more narrow the trading range, the bigger the market’s move will be when it breaks out.

With my indicators taking on a somewhat bearish bias, there are two big factors to consider as we watch this market play out.

Of the 500 stocks that make up the benchmark S&P 500 index, 100 of them are in bear market territory, as measured by a 20% or greater decline from their highs. Said another way, 100 of the S&P stocks are down more than 20% off of their peaks. A year ago, that number was only 20 stocks, which shows that the stock market is not as healthy as it looks.

I touched on the second factor last week, but I want to say again that the merger and acquisition (M&A) boom is bad news. Going back to the early 1900s, periods of high M&A activity are always followed by a severe decline in stock prices.

I have also mentioned several times that the Dow Jones Transportation Average (DJT), a leading stock market indicator, remains in mired in a multi-month downtrend. Gold, as measured by the SPDR Gold Trust (ETF) (GLD), is still caught in a trading range, with significant support at the $110 level.

In fact, the trading landscape remains little changed, with the exception that my indicators have taken on a more negative tone — which is why I recommend that traders lean toward puts as portfolio insurance. Today I’m recommending one such trade.

Buy to open the Micron Technology, Inc. (MU) Oct 23 Puts (MU151016P00023000) at $1.15 or lower. After entry, take profits if the stock price hits $22.70 or the option price hits $2.10. Exit if the stock price closes above $26.20.

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