Point of Decision

We are very close to a move that could be important and decisive. On the first chart, a series of descending tops and ascending bottoms are squeezing the S&P 500 to the point of decision. Within the standoff that has developed ever since the announcement of a third round of quantitative easing there is a less noticeable hint as to the likely direction of the eventual move. That hint is the volume, which has been consistently heavier on the down days than on the up days, suggesting an underlying selling pressure.

I had been forecasting a little upside at the end of last week because of the oversold position of the Arms Index moving averages. That rally did develop to some degree, but it was so weak that it was a disappointment. Now the oversold position has been eliminated in the five-day moving average and is likely to be on the 10-day MA soon. That also hints at downside rather than upside market movement. Traders who bought last week should go to a neutral position but wait for a sign of weakness before going short. The long term is still very overbought....253 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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