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In focus: Buy signals take hold

By Lawrence G. McMillan

The week leading up to the Fourth of July holiday was a “perfect storm” of bullish activity, or at least it turned out that way. There were several technical, seasonal, and even some fundamental factors at work. There was an oversold condition, month-end window dressing, first-of-the-money seasonal factor, pre-holiday bullish seasonal patterns, and even some help from Europe (delaying the Greek credit crisis). Add it all together and it was one of the strongest weeks in recent memory.

This had the effect of turning our intermediate-term indicators bullish, although some overbought conditions are already starting to appear. The chart of the Standard & Poor’s 500 Index SPX +0.78%  had been in a downtrend since Bid Laden’s killing in April. For the first time that downtrend was broken last Friday. That activates targets of 1420 or so, according to the strength we see on some of these signals. The first order of business, though is to hold onto most of the recently-achieved gains, and then to assault the old highs at 1370 or so...

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