Downside to Come in Overbought Market

The very heavy volume on Friday is apparent in the chart of the Dow Industrials, the first chart below. Of course it was a quarterly options expiration, which was part of the reason for the volume, but the down move and the wide trading range are saying that a change of direction appears to be starting to materialize. The steep uptrend line going back to November has been broken and MACD is near its highs but looking as though it is about to cross to the negative side.

It is still an overbought market as seen on the 21-day moving average of the Arms Index. Also the overbought is spreading to the longer term 55-day, implying a more lasting decline. The drop on Friday and the follow through on Monday are warning of more downside to come....211 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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