Arms Index Extremely Overbought

December 9, 2010 11:30am by Barry Ritholtz

Dick Arms notes that the short term and longer term ARMS Index (TRIN) is extremely overbought. The ARMS index has a pretty decent track record.

This suggests that the Fed’s QE2 and euphoria over tax cuts and FICA holidays are up against a rather overbought condition.

Traders should tread cautiously here:

Dow Industrials with ARMS Index

click for ginormous chart
This chart includes an assumption of a close today in the Arms Index of the current reading of 1.00. (11:15 EST) The 5-day, and especially the 10-day AI moving averages are at extreme levels usually seen at or very near market highs.

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