Complacency Is a Warning

Neither the bulls nor the bears are able, at this time, to gain the upper hand, and that has resulted in a return to the checkerboard pattern on the Arms Candlevolume chart of the Dow, the first chart below. Last week, the bulls rejoiced as new highs were made, only to be disappointed later in the week as prices slid back to the bottom of the consolidation. In the meantime, the shorter-term Arms Index moving averages are a bit more overbought, but not dramatically so. 

The second chart below shows us that the market has been slightly lower in the last three weeks, yet the volatility index (VIX) has declined. Market weakness should lead to a higher VIX, but so far that is not the case, telling us that the level of complacency is still at an extreme, as though the selling disturbs no one. That is a warning....263 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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