Short the Rally By Dick Arms About this article: Last Thursday's market drop produced a very high Arms Index that swung the 5-day and 10-day moving averages to an oversold level, and prompted my comments on Friday, saying that in spite of the technical damage, we could look for a short-term rally in order to eliminate the oversold condition. That is what we have seen in the last two trading days. But Tuesday the rally appeared to run into overhead supply, and backed off from their best levels. It will still be a few more trading days before that big number in the Arms Index passes out of the series, so I would expect further strength, or at least a holding pattern, before stocks start to slide again. But it is important to recognize that the decline took out the ascending trend line and penetrated an important level of support. This development is a sign... Or, call us at 1-866-321-TSCM (8726) Monday-Friday, 8 a.m.-6 p.m. ET. Outside the U.S. and in Canada, call 1-212-321-5200. More Stories From RealMoney Durable Goods Up Move Down the Tech Food Chain Jobless Claims Still High Bulls' Tenacity Is the Big Question Mark Should You Buy It? Pharmaceutical Product Development Bad News Trumps All Support for Banks Holds, For Now Bummer, Yields Are on the Rise Money on the Line Makes a Big Difference Structured Products: Unsafe at Any Price MORE STORIES FROM REALMONEY

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