Hold Your Shorts for the Resuming Slide

The steep decline in the first three days of last week took the averages down to the exact level where a technician would look for support to emerge; the highs of October and November. So the strength yesterday was very predictable. But, lest we become overly enthusiastic, the low last week had none of the characteristics of an important low. Volume and trading range did not expand. The volume was not overwhelmingly on the sell side. The CBOE Volatility Index (VIX) did not become extremely high. There were no signs of widespread fear. That says that the rally, while not a surprise, does not appear to be maintainable. There was enough technical damage done, by the breaking of support levels and uptrend lines, to seemingly require the above technical signals before the decline is over. I think shorts can be held, and new shorts initiated on any sign the slide is resuming.

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(To do my Equivolume charting, as in the charts that appear in this column, I use a charting program called MetaStock. To learn more about this method, read my series of columns, Trading With Equivolume.)...167 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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