Not the Time to Be a Buyer

With such overbought numbers on the Arms Index, the second chart below, particularly the eight-day moving average, I am looking for any sign that a pullback is starting. Perhaps we saw a sign of that in the last two days in that the S&P 500 gapped upward Friday, which is somewhat unusual. That was followed by a tight trading range, making the gap look like an exhaustion gap. Further strength seemed to fail Monday, with early gains given up later in the day. Also apparent was the extreme complacency shown by the Volatility Index (VIX), which closed at its lowest levels since 2007 on Friday. It is early to declare a slide is beginning, but it certainly appears to be no time to be buying. I repeat the caveat at the end of last Thursday's column: A downturn is very close.

S&P 500 Source: StockCharts.com View Chart » View in New Window » The Arms Index Source: Metastock View Chart » View in New Window »

(To do my Equivolume charting, as in the charts that appear in this column, I use a charting program called MetaStock. To learn more about this method, read my series of columns, Trading With Equivolume.)...211 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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