A Clear Bearish Signal

Last Thursday I wrote that the 1635 level in the S&P 500 represented support, and that a break of that level would be a signal for traders to put on short positions. On Friday, right at the close, the support was decisively broken. That is a bearish signal, especially in view of the sharp increase in volume on the move. Therefore, it looks as though aggressive traders should be looking at the short side of the market.

Monday, the Dow Jones Industrials were trying to regain part of the drop, but the S&P 500 continued to work lower much of the day, as we see on the first chart below. In the meantime, we still are not seeing any very bearish numbers coming into the Arms Index data. Consequently, the overbought condition is not being eliminated, as we see on the five-day and 10-day moving averages on the second chart below....251 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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