Severely Overbought

The five-day and the 10-day moving averages of the Arms Index are the most overbought they have been since way back in March! At that time, the market, as measured by the S&P 500, was making its highs for the year. Moreover, the current reading has a history of signaling shorter-term market highs. In addition, the VIX readings are back to a level of complacency that is disturbing.

Note on the first chart, below, the last three entries. On Thursday and Friday, we had large trading ranges as the averages skyrocketed, but yesterday the range suddenly tightened, telling us of difficult movement. Combine that with the Arms Index readings mentioned above, and we have a market that looks ready to tumble. Any sign of a downturn would look like a time for aggressive traders to go short....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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