A Reason for Caution

The rally we were looking for is already close to the 1395 level of the S&P 500. That was the number we were watching -- on the way down as support, and now, after its penetration, as likely resistance. That doesn't mean it's time to sell out speculative longs, but it is a warning that another downturn may be close.

There are other reasons to be cautious. The prior low was not climactic, meaning it is unlikely to be a lasting low. The Arms Index moving averages, as seen on the second chart, are becoming overbought. Volatility and volume both remain low. And look at Wednesday's trading range; it was tiny. That suggests the rise of the prior two days is already meeting with difficult overhead supply. Consequently, it looks as though the rise may be nearly over, but I am willing to move stops in close to see if the move can carry a little further....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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