ARMED ADVICE

Interesting time as the SPX is about to challenge its May 8 high of 1326 on the morning of a Fed meeting headed by Big Ben who just a few short months ago was deemed untrustworthy by the markets.

In case you haven't heard, or can't see it, the SPX is about to challenge the old May highs while the momentum indicators scream SELL with their continuing bout with lower highs. Of course the momentum indicators were not in on the secret that crude was about to test a 5 handle, so maybe they are not all knowing. And who would have thought $60 crude would bring about robust economic activity?

One other note besides whose more scared the bulls or the bears; how about how desperate are shorts who want to cover and how anxious are bulls to buy pullbacks?

For what it is worth, the VIX is back to the same level it was at when the market made its prior high back in May (12) and buying and holding at this VIX level is usually not that rewarding.

The dip that was bought big yesterday as noted by Dr. Brett may in fact be a precursor to higher prices, but the risk and reward seems to be in favor of the sellers.

Anyhow, Dick Arms of realmoney.com also has some thoughts on buying the DJIA at these levels:

"A believable breakout will need to have heavy volume and a wide trading range. That isn't what we have been seeing recently.

Meanwhile, the moving averages for the Arms Index remain quite neutral. The 10-day is at 1.07 and the five-day is at the same level, so we're not learning much from them. But there are other negatives.

The VIX is back to an area that usually coincides with a market high. The cycles also suggest a high in this vicinity. The low volume reflects a lack of exuberance. I continue to feel that the risks are high in this area, and I'm willing to remain cautious. "