What The Arms Index Is Telling Us
“Despite three years of falling prices, which have significantly
improved the attractiveness of common stocks, we still find very few that even
mildly interest us. That dismal fact is testimony to the insanity of valuations
reached during The Great Bubble. Unfortunately, the hangover may prove to be
proportional to the binge.†—
Warren Buffett
I wholeheartedly agree with Mr. Buffett. In
fact, let’s take this one step further. (BRK.B) is setting up for a nice short
opportunity:
-
Despite today’s rally it is
hitting a large Fibonacci price resistance zone. -
The previous two rallies were
each right around 12%. This rally from low to today’s high is now at 12%. -
The 200 day SMA is running
right through our Fibonacci resistance zone adding strength to our resistance
zone.
Housekeeping:
Last week I mentioned OIH was hitting price support. It bounced out of the
support zone the next day and has come back to retest our price support zone.
The update price levels are 53.32-56.09. There are 8 Fibonacci price levels
acting as support in this area for OIH. If this zone fails, we are likely to run
for new lows. I also have updated time cycles for this HOLDR coming in from
March 10 to March 12 for a cycle low.
Monday Afternoon Exam
There is an indicator
called the Arms Index. The current reading is at 5.92, which is the
third-highest reading ever. The only two times this Index reached higher
readings were on Oct. 19 1987, and Oct. 27, 1997. Readings of over 3.00
according to this index come with a 94% probability that the markets will rise
the next day, with an average gain of 1.64% the next day.
Here is the question: Since 1987, how many times has the Arms Index had readings
above 3.0?
**The winner will receive
one month of
my service at no charge and a one-on-one Web Conference meeting to discuss
how I use my reports to trade.**
Let the games begin!