Market technician Dave Chojnacki of Street One Financial assesses the state of the U.S. stock averages and finds continued strength despite conditions forming for a top or reversal.

Equities opened lower on Thursday, despite economic reports coming in as expected. Prices moved lower through the morning hours and finally caught a bid early afternoon.

We saw weakness in the Materials and Energy sectors, with strength in Utilities and Consumer Discretionary. Assumedly, investors were giving the rally market movers a breather while they moved into safety sectors.

By the end of the day, the DJIA and SPX eked out small gains, while the NDX ended to the downside. The DJIA recorded its 10th straight record setting day.

At the close, the DJIA was up 34.7 points, the SPX inched up 0.99 of a point, and the NDX fell 0.37%. Breadth was slightly positive, 1.14 to 1, on average volume. ROC(10)’s were mixed, with the DJIA advancing and the SPX and NDX declining. All three remain in positive territory.

RSI’s fell in the session for all three major indices. The NDX, which had been the leader, fell to 78.2 and the new leader is now the DJIA at 81.5. They all remain at overbought levels.

All three major indices continue with their MACD above signal. The ARMS index ended the day at 1.53, a bearish level. With the DJIA establishing another record, the strength continues for equities. All three major indices did develop candlesticks in yesterday’s session, which suggest a topping or reversal. We have mentioned the over-extension of the averages, but after yesterday’s session, they established a bit of daylight from their Bollinger Band tops.

The 20D-SMA’s are: DJIA- 20810, NDX- 5225, and SPX-2315. Gold has been moving higher since mid-December and the GLD ended at 118.94, up 0.87%. We do see formidable resistance there at 120, which coincides with gold’s price level of $1250/oz.

The VIX was nearly flat in the session yesterday, finishing at 11.71, off just 0.03 of a point.

Near term support for the NDX is at 5325 and 5300. Near term resistance is at 5350 and 5362. Near term support for the SPX is at 2362, 2350 and 2337. Near term resistance is at 2375, and 2382.

Europe is lower in early trade Friday, and U.S. Futures are also lower before the bell. In terms of major economic reports on tap today, we’ll see Michigan Consumer Sentiment at 10:00am and New Home Sales also at 10:00am.

The SPDR Dow Jones Industrial Average ETF (NYSE:DIA) fell $0.68 (-0.33%) in premarket trading Friday. Year-to-date, DIA has gained 5.22%, versus a 5.78% rise in the benchmark S&P 500 index during the same period.

DIA currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #6 of 75 ETFs in the Large Cap Value ETFs category.

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Disclaimer: The content of this article is excerpted from a daily newsletter from Street One Financial. While ETF Daily News may edit the contents and add a relevant title to the piece, the author, David Chojnacki, does not endorse or recommend any issuer or security mentioned herein.

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