Dow Industrials Squeak Green, Others Go Red

The Dow Jones Industrials (DIA) gained 2.77 points on Tuesday to keep its eight day win streak alive while other major indexes declined for the day.

The S&P 500 (SPY) was again unable to reclaim all time high numbers as the index declined 0.24%, and it was joined by the Nasdaq 100 (QQQ) dropping 0.39% and the Russell 2000 (IWM) slipping 0.24%.

The day was another low volume day as investors toyed with record highs and wondered what is happening to Apple (AAPL) as the tech darling dumped another 2.16% to close at $428.43.

Europe was mostly down on the day with the iShares Italy ETF (EWI) dropping 0.71% and the iShares Spain ETF (EWP) falling 0.77%. Asia joined in the red zone with the iShares Japan ETF (EWJ) falling 1.09%.

VIX, the CBOE S&P 500 Volatility Index, also known as the “fear index,” jumped 6.14% after falling to a six year low Monday as investor complacency receded for the day.

As March drags on, more attention is turning to the potential for yet another deadlock in the sequestration debate and yesterday’s House Republican proposal to trim the budget deficit added to concerns that the two sides would be unable to find a compromise position as Paul Ryan’s “Path To Prosperity” was called the “wrong course” by the White House. As everyone knows, markets hate uncertainty and the ongoing stalemate between the House of Representatives and the White House is uncertainty of the highest degree.

With economic reports remaining light until today’s retail sales reports, more attention is likely to be paid to the continuing political standoff in Washington.

On a technical basis, major U.S. indexes remain overbought with the Dow Jones Industrials (NYSEARCA:DIA) sporting daily, weekly and monthly RSI and Stochastic readings in or near overbought levels. Current levels are typically conditions from which significant declines have started in the past.

Bottom line: It’s not often that daily, weekly and monthly RSI and Stochastic readings all reach overbought levels, and certainly, coupled with low volume and significant resistance levels, current conditions flash a red flag for the near-term health of the Dow Jones Industrials (NYSERCA:DIA) and other major U.S. indexes. Investors will be looking for resolution from Washington and ongoing support from the Federal Reserve for reasons to bid the currently overextended market higher.

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