Building a Ceiling

It looked as though the markets were quite sure a week ago that the Washington conflicts would lead to a brinksmanship solution. Therefore, in typical Wall Street fashion, traders started, on the rumor, to discount the anticipated reality. So on Monday, the early rally led to a stalemate at higher levels, which has the appearance of difficult overhead resistance just above yesterday's high.

In the process, though, we have seen the short-term Arms Index moving averages rapidly become overbought. Look at the second chart below. The implication is that we are about to see a pullback. Moreover, if the cycle that has been in effect since late last year continues, the last low appears to have come in too soon, suggesting that we are likely to make a lower low in the next week or so. There may be room in here for aggressive traders to make a profit on the short side....240 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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