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By Lawrence G. McMillan

For nearly two weeks, the market – as measured by the S&P 500 Index – had mostly declined. From a high of 1,261 on Dec. 7, the index fell to nearly 1,200 by last Monday, Dec. 19. As one might imagine, such a decline created an oversold condition.

That condition, plus some positive news out of Europe, created a vortex of buying on Tuesday, with the S&P 500 gaining back 36 points in one day. Furthermore, the market weathered some fairly heavy selling this morning and bounced back to finish positive. This rally is likely to last a while longer, but may run into some serious problems in another week or so.

The chart of SPX is still one that shows converging bullish and bearish trend lines. So, despite some fairly large moves in recent weeks: the decline heading into Thanksgiving, the rally into early December, and the afore-mentioned decline into this past Monday, the market has not broken out through these trend lines. We continue to feel that a breakout from this “triangle” will be a catalyst for a major market move.

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