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 an Investment Analyst for an asset management firm in Central Indiana. He specializes and writes about technical analysis as well as macro economic developments.