Bear Market Here? Dow Jones Industrial Average Is Suddenly The Weakest Major U.S. Index

Technical analyst Dave Chojnacki of Street One Financial kicks off the new trading week with a recap of last week’s bearish market action, updates the important technical levels to watch in the major U.S. averages, and previews the upcoming week.

After last Thursday’s big losses, the market settled down on Friday, as traders were squaring off trades on option expiration day. This caused volume to pick back up, but the trading remained in a narrow range.Equities continued lower into the final bell, with the Dow Jones Industrial Average (DJIA) being the biggest loser. The Nasdaq 100 (NDX) and S&P 500 (SPX) were little changed to the downside. IWM (Russell 2000) flashed warning signs, as it remained below its 200D-SMA.

At the close, the DJIA fell 0.35%, the SPX slipped just 4.4 points, and the NDX falling 5.4 points. Breadth was slightly positive, 1.1 to 1, on average volume. ROC(10’s) declined, with all 3 major indices remaining in negative territory. RSI’s were lower, and ended in the low 40’s to upper 30’s. The ARMS Index finished at 1.25, a slightly bearish reading.

For the week, the major indices fell for the second straight week: the DJIA fell 0.8%, the SPX gave up 0.6%, and the NDX lost 0.7%. The VIX fell 8.3% to 14.26, and actually fell a total of 7.4% for the week, despite the pullback in stocks. We get more Housing data this week, but nothing major on the economic data front will be released today.

Long term, the upside bias continues, however. We have the SPX moving close to its 20WK-SMA of 2417, which flashes a caution signal. The major averages do remain comfortably above their 200D-SMA’s: DJIA-20577, SPX-2346, NDX-5388.

Short term, we had the SPX breaking a trend-line that held support since last November. This level is near 2450. The NDX and SPX have also broken below their 50D-SMA’s of 5806 and 2449, respectively. Critical short term support is at 5597 for the NDX and 2405 for the SPX.

Near term, the weakness continues. We see RSI trend lines being broken and the major indices below key near term moving averages. Investors should stay vigilant for more signs of additional weakness in coming days.

Europe is lower in early trade Monday, while U.S. Futures are slightly higher in the premarket.

The SPDR Dow Jones Industrial Average ETF (NYSE:DIA) rose $0.03 (+0.01%) in premarket trading Monday. Year-to-date, DIA has gained 10.88%, versus a 9.58% 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 #4 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.