The Incredible Shrinking Range

The trading range in the S&P 500 was very small Friday -- but it became even smaller Monday, registering its narrowest range in many months. Narrow ranges are indicative of difficult resistance, and are most often seen after large advances and before substantial declines. We've seen three weeks of market strength, and the averages are now encountering their all-time highs, so the narrow range is not a big surprise at this juncture. On the first chart below, we can see the tiny entry Monday.

The Arms Index moving averages, meanwhile, are reading as overbought. That's especially so on the 10-day, as seen on the second chart below. Also, the longer-term moving averages are quite disturbing, as they suggest a longer-term high point in this vicinity. In light of this, I don't believe a decisive breakout is likely at this point....248 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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