Dropping Without Panic

The market drop last Thursday looked very important. It came after a month of sideways action and broke the bottom of that consolidation. One of the tenets of the Equivolume methodology (see my book Volume Cycles in the Stock Market) is that the volume in a consolidation is about equal to the volume in the ensuing move. Hence it looks as though this is the start of a slide that is likely to go a good deal further. I had been projecting the next cycle low for late August, which seemed a week ago to be unattainable but now looks reasonable.

The Arms Index continues to refuse to show any panic, staying at very normal levels. That has held the five-day and the 10-day moving averages, shown below, at quite overbought levels in spite of the sharp market break last week. That too is telling us that the decline is likely to go further. I had suggested, last week, that traders go short. I see no reason to cover the positions yet....224 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

Read the full story and get access to the Real Money Pro trading floor.

There’s no substitute for a trading floor to get great ideas, so Jim Cramer created a better one at Real Money and blogs there exclusively. We then added legendary hedge fund manager, Doug Kass, with his exclusive Daily Diary and best investing ideas. Staffed with more than 4 dozen investing pros, money managers, journalists and analysts, Real Money Pro gives you a flood of opinions, analysis and actionable trading advice found nowhere else, and allows you to interact directly with each expert.

Already a Subscriber? Please login.

Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data provided by Interactive Data. Company fundamental data provided by Morningstar. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by Interactive Data Managed Solutions.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

IDC calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.