ANOTHER TAKE

Dick Arms has a column this morning on realmoney discussing the possibility that the major market indexes may slide back to their recent lows. Here is his analysis:


"After moving sideways for eight sessions, the markets appeared to make up their minds Tuesday: They backed away decisively from the resistance that had been stopping them.

The Dow and S&P 500 broke below the bottom of the consolidation, suggesting they were entering a short-term pullback phase. The Nasdaq did not break support, but it, too, looked weak Tuesday.

Since late November we have seen four quite regular cycles, each lasting a little more than a month. The recent high appears to fall right into that pattern, implying that a slide lasting two or three weeks is likely. That would suggest doing some selling in aggressive trading accounts, with the intention of coming back in on the next low. The cycle pattern would put that low in about the middle of April."


My take is a bit different. The SPX seems to have broken above the recent trading range and now the former resistance in the 1290 to 1300 range becomes support. In addition, on a shorter term basis, the 2 day RSI of under 10 has now appeared, so for me its time for a shot from the long side. The rule is buy when 2 day RSI is under 10 and sell when it is over 75. For what it is worth, I prefer to trade by scaling around the numbers. Unfortunately, the Volatility Sisters have barely lifted and I prefer to trade when all of the signals align so I am not making my biggest bet.