Becoming Overbought

Since the sharp down-and-then-up move in markets a week ago, the movement has been very restricted. We see on the first chart below a series of four boxes, all quite short and reflecting little movement in either direction. This is typical of what happens when an advancing market encounters difficult overhead resistance. So far, however, there is not enough downward movement to tell us a slide is starting, however. 

The Arms Index, though, is more bothersome. In the last two weeks, I have repeatedly pointed out that the Arms Index was not going overbought in spite of the rise. That now is changing. On the second chart we see that both the five-day and the 10-day moving averages are reaching levels that they usually see just prior to a pullback. Consequently, traders may now want to take some profits on long positions and be ready to go short on any sign of a downturn....226 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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