What a Difference a Week Makes

It's been a full week since my last commentary, and what an eventful week it was. We have gone from an overbought market that was challenging the old highs to a suddenly lower market that is now threatening the lows touched in April. That means we are still in the consolidation range that we have been observing for two months. That it comes after the long uptrend since October and has moved sideways enough to end that uptrend, the implication is for more downside soon. But right now, it still suggests we could go either way, and a move out of the consolidation would be expected to generate a large move.

On a short-term basis, the selling of the last week has pushed the Arms Index moving averages to levels oversold enough to leave room for a rally. Aggressive traders could play such a rally, going long here and protecting themselves with stops just below the indicated 1358 support level. But longer term, the numbers suggest more on the downside, so long positions should not be overstayed. The upside resistance is around 1415 on the S&P 500....253 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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