Dick Arms – “Correction Not Over”

Barry Ritholtz over at The Big Picture posted a report from Dick Arms, creator of the Arms Index, an indicator that looks at advancing and declining stocks and volume. Dick feels the current decline in equities hasn’t quite reached a bottom in his opinion. He also posted a chart of a possible Head and Shoulders pattern taking place in the Dow Jones Industrial Average.

From Dick Arms:

Tops and bottoms signal themselves very well technically, but it is the in-between moves that can be difficult. At this time, having seen such a sudden drop, we have to ask ourselves if it is now over. Have we eliminated the weak holders, washed out the selling, and set the stage for a new advance? If so we should have seen very large trading ranges, extremely heavy volume, panic selling, a very high VIX reading, very bearish Arms Index moving averages, short and intermediate term, and possibly the reaching of a historically significant support level. So far I do not see that.

Arms is a well-respected technical analysis and one whose opinion I have respect for. If the head and shoulders pattern he sees does play out, then we still have some equity weakness to work through before getting a tradable bottom.

Source: Probably Not Over (The Big Picture)

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About Andrew Thrasher, CMT

Andrew Thrasher, CMT is a Portfolio Manager for an asset management firm in Central Indiana. He specializes and writes about technical analysis as well as macro economic developments.