A Downturn Appears Close

The lackluster trading continues. The major averages continue to edge slightly higher, but reluctantly. But one thing has changed and it may be very important. In recent weeks I have repeatedly brought attention to the fact that the Arms Index moving averages were very indecisive and uninformative. It seemed to be the missing piece in the otherwise overbought market background.

Now, a series of very bullish readings accompanying the recent rise in the markets has produced a truly overbought picture in the AI. The second chart below shows the five- and 10-day moving averages. Both are now at levels not seen since the last day of last year, just as the markets were making a top leading to a substantial pullback and stalling the markets for four months. This is a further warning that the markets are overbought, and it suggests a downturn is very close....226 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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