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In focus: Bears try to take over

By Lawrence G. McMillan

The Standard & Poor’s 500 Index was not able to make new highs over the past week. In fact, selling set in and knocked the market down. However, there is still a general bullish overtone to the indicators, and so the bulls have certainly not capitulated yet. Ostensibly, the catalyst for this selling is the continuing, worsening situation in Japan. However, it is just as likely that the market had reached too much of an overbought condition, and that had to be worked off — which it has been, for the most part.

Let’s start with the chart of S&P 500 (SPX 1,312.07, -2.34, -0.18%)  itself. It has now pulled back to the 1310 area (which is roughly the low for each of the last two days). That is also the level at which the rising 20-day moving average now stands. Thus, so far, all SPX has done is pull back to its rising moving average. Even if it penetrates slightly below that — to 1300, say — it will still be a bullish chart. However, a decisive close below 1300 would change the picture from bullish to bearish.

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