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Weekly Commentary 6/24/2011

By Lawrence G. McMillan

Oversold conditions had built up over the past couple of weeks, and they finally spurred a decent rally -- mostly all in one day this week (Tuesday).

The chart of $SPX itself remains in a bearish downtrend, with the series of lower highs and lower lows.

Equity-only put-call ratios raced higher over the past two weeks, reaching oversold status as the market continued to decline.  Then, when the rally unfolded, the standard ratio rolled over to a buy signal, while the weighted ratio topped out as well.

Market breadth had become very oversold by the end of last week, and that helped spur the oversold rally this week.  Now, breadth indicators are on buy signals.

Volatility indices ($VIX and VXO) have been rather wild.  In my opinion, the $VIX chart is still in an uptrend (i.e., bearish for stocks).

In summary, we are seeing some indicators turning bullish, but not the chart of $SPX.  This combination of factors has been seen before, and the trend of $SPX is usually the "correct" indicator.

Click here to view this week's charts

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