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Market Commentary 5/20/2011

By Lawrence G. McMillan

The stock market was under some pressure entering this week, but a positive intraday reversal on Tuesday has stemmed the bearish tide, and may have turned things bullish once again.

The equity-only put-call ratios are in trading ranges. They gave appropriate sell signals at the end of April and since then they looking like dampening waves with each subsequent high or low.

Market breadth has recovered this week, but the readings on our breadth indicators are neutral.

The volatility indices ($VIX and $VXO) have been important indicators. $VIX has reversed back down quickly and is below 16 again. That's bullish in that a downward trend in $VIX is bullish for stocks.

In summary, the bears fumbled away yet another chance to break the market this week.  A breakout above 1360/below 1320 will likely lead to a sustained move.

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