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Strategies & Market Trends : Mish's Global Economic Trend Analysis
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To: Haim R. Branisteanu who wrote (24413)2/25/2005 1:02:08 PM
From: mishedlo  Read Replies (1) of 116555
 
by Dick Arms
thestreet.com

Something doesn't smell right. The rally of the last two days appears quite impressive, out of context. But I think we have to look more closely before deciding whether to participate.

Look back one more day, to Tuesday, and see that the last two days have done nothing more than regain a large part of the big drop from that day. And the big drop on Tuesday certainly looked like a change of direction; a hesitant market suddenly chose to go down, and did so with a big jump upward in trading volume. Conversely, the last two days, when the markets have risen, the volume has been disappointingly low. It certainly looks as though the pressure is down, not up.

In the last two days, we have produced some rather low Arms Index daily numbers. They have replaced higher numbers in the shorter-term moving averages. The result is that the 10-day moving average of the Arms Index closed Thursday at its most overbought reading since Dec. 28, 2004. That was right at the bull market highs.

The fact that we again are that overbought but are so far below the highs is disconcerting. I take it as a warning that the rally of the last two days is unlikely to have legs. I am unwilling to follow it at this time, and am passing that suggestion along to you.
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