The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.

NEW YORK (

TheStreet

) -- Investors seem unable to make a strong commitment to market direction, with both the Dow and S&P 500 primarily trending sideways so far for 2012.

What will it take to move the needle in a clear direction either way?

At

Top Gun Options we believe, as is always the case for the market, a combination of circumstances will decide the outcome to that question. The key elements, at least for now, are Wall Street's latest round of earnings reports and investor sentiment towards the direction of the euro-zone, which will be reflected in both the rise and fall of the euro as well as the yields on the next round of Italian and Spanish bond auctions. This week's emerging data from both sides of the Atlantic should bring the picture a little sharper into focus.

Taking a look at the benchmark

S&P 500 Index

(SPX)

, we see that it is approaching the "psychologically important" 1300 level.

It is a level that has not been touched on since last August, when it was punctured by a wave of panic selling tied into fears of default among the PIIGS (Portugal, Ireland, Italy and Spain). Since then, investors appear to have factored a lot of the ramifications of a possible default by Greece, continued high cost of euro-zone debt, and other aspects of the EU sovereign debt crisis into the market.

If things remain as the status quo, meaning no new major surprises in terms of extreme higher bond yields, revelations of inadequate deposits held by the major EU banks, or sudden mood swings by the French or German governments, there could be a potential base from which the Bulls can build upon. If fourth-quarter corporate earnings reports prove to be at or around analyst projections, some momentum towards the upside, and past the 1300 level, could result.

Quick Look at the VIX

The VIX (Chicago Board Options Exchange Market Volatility Index), remains at its lower trading levels, traveling within a 10% range over the last three weeks, which is, for the VIX, an indication of relative calm for the market.

Finding support at 20, the VIX remains an excellent value as a hedge against any extreme downward shift in market sentiment. So, if you are feeling optimistic towards the New Year so far, go ahead and follow your Bullish impulses. However, insurance is a good idea against such a strategy going bad, and the VXX, an ETF that tracks the VIX, is a good tool for protective purposes.

Firing Line: Remember that the VIX generally tends to go up as the equity market goes down, and vice-versa. Don't forget to register for TGO's complimentary week of Flight School training by clicking here:

http://topgunoptions.com/flight-school/ Happy hunting and make sure you hedge!

This commentary comes from an independent investor or market observer as part of TheStreet guest contributor program. The views expressed are those of the author and do not necessarily represent the views of TheStreet or its management.