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Technical Analysis: Bulls Stay In Charge

The major indexes have moved nicely higher since our last update a week ago and are poised to test the all-important 1553-1556 July and 2000 highs on the S&P 500. The environment for stocks remains favorable through Friday, but Oct. 7 to Oct. 29 could see some manner of pullback or consolidation in the indexes.

The sentiment picture is mixed but improving since our last update, with Investors Intelligence bulls-bears at 55-25 — a little toppy — but commercial futures traders once again solidly long the big S&P futures contract. The NYSE advance-decline line continues to lag, a worrisome sign for broad market health, but in general, it looks like it could turn out to be the fifth straight mild October for stocks, particularly if the S&P can set a new all-time high this week. Still, this is a big area for the market, as we've found out twice this year already, so October likely warrants its usual caution. We will keep you updated as market conditions change and expect to resume regular publication of the Technical Analysis column shortly.

Paul Shread is a Chartered Market Technician (CMT) and member of the Market Technicians Association.