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In focus: Upside breakout in place

By Lawrence G. McMillan

The market has finally broken out to the upside — sort of. The Standard & Poor’s 500 Index finally made a new 2011 high, at last joining the Dow Jones Industrial Average, Value Line, Nasdaq 100, DJ Transports, DJ Utilities, Nasdaq Composite, and the NYSE Index, among others. The Russell 2000 is not quite at a new high, but it’s close.

Most of those indexes have made new highs several times since this past February, but this is the first time for the S&P 500 SPX -0.06%  . On the initial breakout on Tuesday, some of these indexes stalled just above old highs, but they all closed at new highs as well, which was bullish. Today, most of them added on another nice gain.

The $SPX chart now shows support at 1340-1345 (the previous resistance), and at various other levels, all the way down to the bull-market-defining trend line as shown in the graph below. As long as $SPX stays above that trend, it is on an intermediate-term buy signal. However, that trend line is well below current prices — at about 1300 — so it would be disappointing to see a pullback of that magnitude now. Rather, we expect to see prices work higher while the trendline does the same.

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