The Charts Call for a Downturn

The overbought market we had been warning about last week led to a large slide. It also took the averages, the Dow, S&P 500 and Nasdaq, to just about where support would be expected. Moreover, we had a sudden switch by the end of  last week from quite overbought Arms Index moving averages to very oversold,  especially in the five-day. So Monday's rally was to be anticipated. The question is, how far will it carry? 

Looking at the first chart, below, it looks as though the market has gone from a "black trend" to a "checkerboard" and then a "red trend" on the Arms Candlevolume chart. That suggests we are headed lower. Add to this that the cycles call for a low near the end of this month, and it leads to the belief that this rally is likely to quit soon, and it is therefore a selling opportunity, not a buy signal...257 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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