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By Lawrence G. McMillan

Suddenly, the stock market started to develop "religion" about the U.S. debt situation, and sold off sharply this week.      

In one sense, this is like any other "event" -- an FDA hearing or a potentially volatile earnings report: the underlying has trouble moving decisively in either direction until the event has passed.      

The chart of $SPX is no longer bullish; it has turned neutral. There is support in the 1295-1300 area (today's lows and mid-July lows). Below that, there is a large support area down to the June lows at 1260.      

Equity-only put-call ratios are turning bearish (see Figures 2 & 3). They have finally been affected by this week's decline.  The standard ratio is a confirmed sell, as is QQQ weighted. The weighted equity- only is not yet a confirmed sell signal.      

At the current time, the breadth indicators are on sell signals and are extremely oversold.      

Volatility indices ($VIX and $VXO) have finally taken notice that a potentially volatile event lies on the near-term horizon. There are higher highs and higher lows on the $VIX chart, which means that it's in an uptrend.  That is bearish for stocks.      

In summary, the worries over the debt ceiling have aborted many of the buy signals, but oversold conditions are appearing already. I would not rush to buy on a mere oversold condition, though. 

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