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Although Overbought, Technicals Signal More Upside For The Dow Jones Industrial Average

Market technician Dave Chojnacki of Street One Financial examines the seemingly immutable rally of the U.S. equities markets, despite Fed warnings of multiple interest rate hikes, and updates the technical levels investors should focus on.

There was a slew of economic news Wednesday morning, which was mixed at best. Equities moved sideways at the open, but quickly turned to the upside and resumed the recent rally.

Even Fed talk of the possibility of more than 3 rate hikes this year could not stop the train. The major indices moved higher throughout the day and ended near their highs of the session. The gains were moderate, as the 3 major averages moved to record highs for the third day this week.

The DJT (Dow Transports) was up 1.17% to a new record high of 9554. At the close, the DJIA was up 0.52%, the SPX added 0.5%, and the NDX gained 0.59%. Breadth was positive, 1.4 to 1, on above average volume.

ROC(10)’s were mixed in the session, with the NDX the only index declining. All 3 remain in positive territory. RSI’s moved higher, with the NDX continuing to be the strongest at 81.9. All three major averages continue at overbought levels.

All three major indices also continue with their MACD above signal. The ARMS index ended the day at 0.87, a bullish reading. As noted earlier, all three major averages recorded record highs. They all developed a ‘Large Bull’ candle in the session, suggesting that more upside is in store.

We also saw volume pick-up in the session, moving slightly above average. The SPX closed a point above our short term target of 2348. The SPX is now up for 7 straight sessions. We see resistance in the 2348-2350 area. The SPX 20D-SMA is at 2295. The NDX continues to be the strongest index near term and closed over the 5300 level for the first time in recent history. Its 20D-SMA is at 5164. Small-caps also participated, with the IWM ETF closing at a new high of 139.59.

The VIX diverged from equities, spiking up 11.4% to 11.97. Near term support for the NDX is at 5300 and 5275. Near term resistance is at 5312 and 5325. Near term support for the SPX is at 2325 and 2312. Near term resistance is at 2348-50 and 2362.

Europe is down moderately in early trade, while U.S. Futures are mixed in the premarket. Once again, we’ll see several major economic reports today, with Housing Starts/Building Permits at 8:30am, Initial/Continuing Jobless Claims also at 8:30am, The Philadelphia Fed at 9:00am, and finally Natural Gas Inventories at 10:30am.

The SPDR Dow Jones Industrial Average ETF (NYSE:DIA) fell $0.00999999999999 (0%) in premarket trading Thursday. Year-to-date, DIA has gained 4.49%, versus a 5.10% 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 76 ETFs in the Large Cap Value ETFs category.

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.

About the Author: Dave Chojnacki

Dave Chojnacki is the Chief Market Technician at Street One Financial. He provides technical support for the Street One team and also develops individual analysis for Clients as requested.

Dave is a major contributor to the ‘ETF Daily’, a morning newsletter providing clients a daily look at market technicals of the major indices and selected ETF’s. Market trends, support and resistance levels are provided in the daily letter. The Technical portion of the daily can also be found on Seeking Alpha. Mr. Chojnacki has been quoted in a number of industry publications including the Reuters, ETF Trends, Minyanville, Yahoo Financial and Investors.Com.

In addition, Dave assists with desk trading when necessary. He possesses a Series 7 and 63.

Prior to joining Street One, Dave designed and developed I/T Systems for the Insurance and Financial Industries.

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