Dow, S&P 500 Close to a Downside Move

Going into last Thursday's market I was writing that we were close to, and could easily penetrate, the lows of the consolidation we had been in since early December. Later that same day we did get such a penetration in the Dow, but then the rally of the next day took us back into the old consolidation. Nevertheless, in terms of the Dow, the low was broken. Looking at the two charts that follow, first the Dow Jones Industrial Average and then the S&P 500, we see that the broader market did not tell the same story. Evidently the heavy weighting of the financials in the Dow made the difference. But, since the financials were the leaders in the prior strength, it is, I believe, significant. Yes. We are still in the consolidation, but we have, I think, been warned that the next move is likely to be to the downside. This is further implied by the very complacent readings in the VIX and the overbought numbers in the longer-term Arms Index moving averages.

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