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By Lawrence G. McMillan

Stocks ran into some severe resistance at the end of last week, when the rally that began in early October ran into the downtrend line of this bear market. Also, the rally peaked out after briefly climbing above the still-declining 200-day Moving Average of $SPX. So far, the bears have won the battle, and there was some rather heavy selling in the early part of this week. This has put the bulls on notice: hold the line at support at 3900, or expect another bad December.

If the bulls get their act back together and do manage to climb above that downtrend line, then resistance at the August highs (4325) would be in play.

Equity-only put-call ratios are beginning to slip. The computer analysis programs still rate both of them as "buy," but there is an over-ride for that. A local minimum is in place on the Standard ratio, and that is a sell signal. For now, the weighted ratio remains on a buy signal.

Breadth has been all over the place. There is little consistency fro day to day -- positive, then negative, then positive again. That is the whipsaw nature of a breadth indicator, and our breadth oscillators have been experiencing those whipsaws. Technically, our breadth oscillators are on sell signals at the current time.

$VIX had been declining while $SPX rallied, but $VIX bottomed out around 19 just as $SPX ran into the bear market downtrend line. Now, $VIX has increased enough that it has returned to "spiking" mode. While it is in "spiking" mode, the market is subject to potentially violent downward swings. But eventually, a "spiking" $VIX will lead to a "spike peak" buy signal.

The trend of $VIX buy signal is still in place and will continue to be as long as $VIX is below its 200-day Moving Average.

The post-Thanksgiving seasonal bullish pattern remains in effect, although it certainly hasn't been generating any profits yet.

In summary, a "core" bearish position should still be held, since the bear market trendline has thwarted the recent rallies and thus remains in effect. A breakdown below 3900 would warrant additional bearish positions -- i.e., an addition to the "core." Meanwhile, we have traded and are still trading confirmed signals from other indicators around that "core" bearish position.

This Market Commentary is an abbreviated version of the commentary featured in The Option Strategist Newsletter.

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