BIG ARMS

My apologies as Blogger is playing havoc with my posts today.

Anyhow, markets continue to trade mixed with DJIA/IWM lower and NAZ/SMH higher. Market internals are flat after being materially lower (the open) and materially higher (early morning).

Sectors doing well include oils, biotech and some tech. Sticking out on the downside are DJIA stocks, small caps, banks and brokers.


The sloppy trade in the financials is sticking out like a fat thumb today as GS continues to trade lower while the NAZ is higher. The markets are going to have problems making an upward move without the financials and the small caps, so if you buy keep it on a tight leash.

Dick Arms had some interesting comments on real money and he echoes some of my bearish view:

"The ambivalence continues. In the last week, we have had very little action in either direction, and volume has come to a screeching halt.

Call it the summer doldrums, but it looks more as though the Street is confused, and therefore reticent to move. Such indecision is usually the calm before the storm. We will eventually see a decisive move in one direction or the other.
But which direction?

The evidence seems to suggest it will be down rather than up. We looked in Tuesday's column at the VIX and the fact that it suggested a downturn. Shown above are the five- and 10-day moving averages of the Arms Index. They, too, are overbought and hint at a downturn.
Most important, perhaps, is the action of the averages on Wednesday. The downturn was enough to penetrate the bottom of the narrow trading range, before rallying back into that range. That, too, suggests the next move will be down rather than up. I remain cautious."

The volatility index tandem of VIX/VXO continue to trade at the bottom of their recent range although not oversold enough for a sell signal but they are on the radar as another bearish tell.

Again, I expect the market to turn south after Labor day as the seasonals turn bad and there may even be a warning thrown in to boot.