No Sign of Fear

As markets push higher and the S&P 500 closes in on historic highs, the number of extreme readings is worrisome. The Volatility Index (VIX) broke the 12 level and went as low as 11.68 Monday. The VIX has not seen such a low level since the market high of 2007. There is virtually no fear in the marketplace, which itself is a reason to be fearful. The second chart below indicates tight trading ranges, which tells us the advance is hitting overhead supply. Finally, the five-day and 10-day moving averages of the Arms Index are in very overbought territory. Combining the above with longer-term indicators we have looked at recently, the market is reaching extremes in both the short and long term. I continue to warn that a drop is just around the corner and likely to be more painful than generally acknowledged by the Street.

VIX/DJIA Source: MetaStock View Chart » View in New Window » Three-Day Moving Average Spread Source: MetaStock View Chart » View in New Window »

(To do my Equivolume charting, as in the charts that appear in this column, I use a charting program called MetaStock. To learn more about this method, read my series of columns, Trading With Equivolume.)...159 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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