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Market Commentary 5/13/2011

The stock market is shooting back and forth like a futures contract. In any case, the 1330 level on $SPX remains our bullish demarcation line.  A close below there would turn us bearish.

Equity-only put-call ratios had generated sell signals a couple of weeks ago, but those may be fading.

Last week, breadth indicators had generated sell signals. But positive breadth for a few days moved breadth back to a neutral status.

One of the most important indicators is the volatility index, $VIX.  $VIX backed off a bit, which was bullish, but it is still in something of an uptrend.  A close above 19 would be very negative.

In summary, both the bulls and the bears have had their chance, but neither managed to engineer a breakout.  The 1330 and 1360 levels are important in that regard, and -- with $SPX almost exactly in the middle of that range -- traders can await a breakout before taking major directional positions.

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