every level you said was critical has broken, why would you go long?
I am looking for a hard counter-trend bounce into the end of the month and NDX is going to lead the way.
This is one of several reasons...
Putting these numbers into the moving averages of the Arms Index,
it put the 5-day Nasdaq at 1.88 and the 10-day at 1.87. On the
NYSE the 5-day is now at 1.64 and the 10-day is at 1.58. Those
numbers are, I think, very important at this time. I usually
consider a level over 1.25 on the NYSE as being very oversold,
and a signal that a buy point is being approached. A level of
1.50 or higher is extremely rare, and has always been seen in the
vicinity of a major market low. In the 32 years since the data
has been available to calculate the Arms Index there have only
been six other times when it has moved to a level over 1.50. The
most significant was at the October 1987 panic. The next biggest
oversold was in October 1997, at the time of the Russian
meltdown. The others were in 1970, 1975, 1980 and 1982. Each
was at or very close to the market low of that period.
The message seems clear. We are seeing oversold levels that are
rare, and have always, in the past, pinpointed a time to be
aggressively buying stocks. It is hard to go against the crowd
when the bearishness is so widespread. Being contrary at
important turning points has always been extremely difficult, but
extremely profitable. We seem to be at, or near, such a point.
Richard W. Arms, Jr.
www.armsinsider.com
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Best Regards, J.T. |
