Exercise Extreme Caution

In spite of one big up day last Thursday, volume on the S&P 500 has remained disappointingly low and the indecision that was the most noticeable factor in the trading of the last month has returned. That puts the validity of the move in doubt, even though some of the averages went to new highs. Look at the last two entries on the first chart. The entry on Friday showed an extremely small trading range, and then Monday it was even smaller. That implies that the advance has encountered very difficult overhead resistance. We are seeing similar warnings in the Volatility Index (VIX), which has returned to a level indicating extreme complacency. Also, the short-term Arms Index moving averages are overbought.

The current trading is eerily reminiscent of last April. I remain extremely cautious....230 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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