Not a Good Time to Jump In

Monday's market drop, right at the opening and persisting throughout the session, actually did not change anything very much; it merely returned the averages to the region they were in at the middle of last week. That region is part of the narrow trading range with an upward bias that has persisted for 13 sessions, and it appears to represent much more difficult movement than had earlier been the case. Monday's narrow trading range, as we see on the first chart below, also tells of difficult movement.

The short-term Arms Index moving averages that we usually look at, the five-day and the 10-day, remain overbought, but as the consolidation continues, they are less dramatic. However -- and this is a particular worry -- the intermediate-term 21-day and the longer-term 55-day, shown today on the second chart, are getting very overbought. That suggests the next pullback is likely to be quite deep and longer lasting. So even though the upward bias to the consolidation is giving us new all-time highs on many days, it looks to be very late in the advance, and this is not a time to be jumping in....232 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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