More Danger Than Reward

After bouncing off support last Friday the market is showing astounding resilience. For weeks, I have been concerned by the overbought numbers, especially longer term, and complacency in the marketplace. The current strength through the old highs is impressive, but it does lack the volume one would expect on a legitimate breakout. Moreover, the shorter-term Arms Index moving averages, which had been quite neutral in spite of the advance, have now gone to overbought positions, as seen on the second chart below. There is far more danger than potential reward buying here.

S&P 500 Source: MetaStock View Chart » View in New Window » Arms Index Source: MetaStock View Chart » View in New Window »

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