BIG ARMS ALERT

Dick Arms out now with a column on realmoney.com where he now shares my current views. Here is what he says:

"The last two days of heavy selling have engendered a level of unsustainable bearishness, in my opinion. Yes, we lost 200 Dow points Monday, and then another 100 Tuesday. The Dow broke the support level of two weeks ago, but the Nasdaq and the S&P 500 did not. The rampant bearishness was on heavier volume, but not extreme volume. But bearishness was pervasive.
When investors seem to all be heading in the same direction as a crowd, it's often time to go the other way. On Monday, the Arms Index was a very high 2.83; declining stocks received almost three times their share of the volume. Tuesday it was not quite as intense, but still bearish, and combined with the former data, we now have Arms Index moving averages that are extremely oversold. The 10-day is again in very oversold territory.

It looks as though there is a massive rush for the exits. I am inclined, on a trading basis, to go against the crowd at this point. I believe we are at or very close to a significant rally, one with a profit potential for the nimble. But as I have repeated often recently, a rally here would be within the context of a market that has taken a big technical hit. Yes, we are oversold, and yes, I think there is room for a profit, but I am not calling for putting on long-term positions, just trading positions. "