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Weekly Commentary 6/22/2012

By Lawrence G. McMillan

The stock market had just about everything going for it in technical terms this week, but then the fundamentalists delivered a nasty blow today (Thursday, June 21st). Technically $SPX is just below the support level of 1330-1340.

Equity-only put-call ratios remain on buy signals, despite Thursday's large decline.

Market breadth was very poor on Thursday.  As a result, both breadth oscillators registered sell signals.

Volatility indices ($VIX and $VXO) were the last indicators to turn positive earlier this week.  That occurred when $VIX fell below 21 on Monday and then proceeded to drop to 17 by mid-week.  As we have been saying for some time, $VIX above 21 is bearish for stocks, while $VIX below 21 is bullish.

In summary, the technical indicators remain bullish, except for breadth.  We are going to give the upside the benefit of the doubt.  But if $SPX should decline further, or if $VIX should close above 21, or if the put-call ratios should roll over, then we would have to relinquish our currently bullish stance.

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