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By Lawrence G. McMillan

This market is now presenting a difficult choice.  It has continued to gain ground almost every day, adding to its overbought condition (the "stocks only" oscillator is above +600, for example), and it is right at the top of the trading range.  In addition, futures traded up 7 points or so overnight.  In the past two months, these conditions would be screaming for a sell, and indeed the market is having its worst day in a while, by far, today.   However, this seems to be a very delayed reaction.  In the recent past, last week’s rally wouldn’t have been “allowed” to go so long without a negative reaction.

So, are the bulls getting stronger, or were the bears just laying in wait for a superb opportunity to deliver maximum emphasis?  If seemed as if $VIX was a clue, as it broke down to new relative lows on Friday, closing well below the 29-30 level in the process.  But today, it’s higher again, with a fury.  The last time we had a chart with a failed downside breakout, it was $SPX two weeks ago tomorrow, and the result reversal and rally was massive... 

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