In Complacent Territory

The drop last week took the averages down to the logical first support area, and support has indeed materialized just about where it would be expected. That does not mean that the slide is over, only that it has been temporarily halted. Actually, the drop last week, while abrupt, was hardly a panic. Look at the first chart below and note that the red down days are smaller than we have seen in other recent declines due to an underlying complacency, whereby the volume remains very low. Moreover, the Arms Index has not seen undue selling pressure, so the moving averages, shown on the second chart, remain neutral to overbought. Also, the Volatility Index (VIX) is still in very complacent territory.

The up move has now become, instead, indecision, but the drop has not been enough yet to declare this the start of a meaningful pullback. I see no reason to be a buyer, but I do not yet see enough evidence to become an aggressive shorter....225 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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