The flip-flop of the markets in the last two days did not do anything to change the larger picture, which is a sideways area that has now been going on for two weeks. As we noted last week, it has the appearance of the right shoulder of a head-and-shoulders top that began in May. Both of the last two days lacked volume, and they just about offset one another. A week ago we were at the support level, and going into yesterday's session we were approaching the top of the consolidation.
Particularly interesting yesterday, though, were the high readings throughout he session on the Arms Index. The down stocks were receiving far more than their fair share of the volume. It showed an underlying reservoir of apprehensive holders who are willing to become sellers on any sign of weakness. The implication continues to be that the next move of consequence, out of this consolidation, is likely to be down rather than up.
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Dow Jones Industrial Average
Metastock
Arms Index
Metastock
Agilent Technologies: Buy
Metastock
Agilent Technologies (A - commentary - Trade Now) moved above a longer-term resistance level four trading days ago. The advance was with better volume and with an expanding trading range. This is part of a pattern of better upside volume over the last four months. Since the breakout it has, in the last few sessions, moved sideways to slightly down, but on lighter trading. This looks like a normal pullback, which is likely to be followed by a resumption of the advance. Using cautions, in view of a less than exuberant market, a helpful strategy would be to place a stop buy order just above the high of last week. If the stock resumes its advance it gets bought, but if it slides further the position is never initiated.
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At time of publication, Arms had no positions in the stocks mentioned.Richard Arms is a renowned stock market technician who invented the Arms Index (often referred to as the TRIN), which has become a mainstay of market analysis, appearing in The Wall Street Journal and Barron's. Arms also developed the widely used technical method Equivolume Charting. Since 1996, he has been publishing the Arms Advisory newsletter for money managers and financial institutions. He also has authored Stop and Make Money: How to Profit in the Stock Market Using Volume and Stop Orders, Profits in Volume, Volume Cycles in the Stock Market, Trading Without Fear and The Arms Index, and has been honored with the Market Technicians' Award for Lifetime Contribution to Technical Analysis. Under no circumstances does the information in this commentary represent a recommendation to buy or sell stocks. Richard appreciates your feedback; click here to send him an email. TheStreet.com has a revenue-sharing relationship with Trader's Library under which it receives a portion of the revenue from purchases by customers directed there from TheStreet.com.
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