The Pattern Has Broken

Until Wednesday's trading, one could argue that the S&P 500 was still barely within the uptrend that had been forming since mid-November. But the drop has gone far enough to break that pattern decisively and decline close to the first likely support level -- the pullback low of two weeks ago. I anticipate a small but not lasting bounce off that level in the next couple of sessions. But the break of the advance suggests the index going lower. The 1395 region has a long history of both support and resistance and looks like a first target.

The second chart is a repeat of the 21-day moving average of the Arms Index, but updated. It remains overbought enough to warn us that we could have a more lasting decline. Those who went short a few days ago should hold the positions until we start to see more oversold conditions. Long-term investors could still be taking profits here....224 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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