Watch for a Top

Perhaps there is more significance to recent trading than meets the eye. The impression is of light volume and lack of much movement since the high reached after the stimulus news from the Federal Reserve. But the activity of the last few days has the appearance of a heavier-volume high being tested with a lighter-volume return to the same vicinity. That is typical action that usually leads to a sharp decline if the level is refused. So, it is very important to see if the small advance Wednesday is turned back. A clue to whether we get a downturn may be the high levels on the RSI, the Relative Strength Index, shown on this chart. It is typical of a market top.

The Arms Index's shorter-term moving averages have returned to quite overbought levels, as seen in the second chart, below. That is another warning that a decline is close. Therefore, traders should be alert to such a refusal of the top as a signal to put on short positions....243 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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