Why the Next Decline Is Very Important

With the New York Stock Exchange slowed to a crawl and rumors abounding, it might well have generated enough fear of the unknown to bring about a bigger slide in markets yesterday than we actually saw. It appeared that the markets, were they not influenced by the NYSE halt, were getting oversold and might even have been rallying. On the first chart, below, we see that the Dow did break the support we were watching a few days ago, which may have extremely meaningful negative longer-term implications. Nevertheless, the oversold condition of the Arms Index on a shorter term basis and the quick move in the Volatility Index (VIX) are both telling us a rally is close at hand.

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