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Can The Fed Push The Dow Jones Industrial Average To Unforeseen Heights?

Market technician Dave Chojnacki of Street One Financial examines Wednesday’s Fed-fueled market rally and updates the important technical levels for the major U.S. indices that investors should focus on.

Equities opened higher on Wednesday, as most economic reports came in better than expected. The major indices moved slowly higher through the day as investors awaited confirmation of a rate hike. The FOMC made their announcement of a quarter point rate hike at 2pm, giving traders the comfort to go in and increase their positions in equities.

The averages spiked in the last two hours and volume increased. The NDX broke out to a new high on the rally and all indices ended with moderate gains. At the close, the DJIA gained 0.54%, the SPX added 0.84%, and the NDX moved up to 0.63%. Breadth was decidedly positive, 6.6 to 1, on above average volume.

ROC(10)’s declined despite the moderate gains, and the DJIA and SPX moved into negative territory. This is one of those times that we can ignore those numbers, because of how the ROC is calculated.

RSI’s moved higher with the DJIA and SPX in the upper 60’s and the NDX at 72.8. All three major averages remain with their MACD below signal. The ARMS index ended the day at 1.21, a slightly bearish level.

The indices had a good day, with the NDX closing at a new high of 5416 and intra-day high of 5426. The NDX closed 2 points above its Bollinger Band Top. The DJIA and SPX approached their recent highs, but closed within striking distance. The SPX tested its 20D-SMA (2368) early in the session, but closed much higher at 2385. IWM (small caps) had a big day, reflecting the strong breadth. IWM closed at 137.73, up 1.5%. IWM remains below its record closing high of 140.36, however.

The VIX, which moved above 12 in the prior session, gave back 5.4% to close at 11.63. It had actually traded with 10 handle at one point.

Near term support for the NDX is at 5400 and 5390. Near term resistance is at 5425 and 5450. Near term support for the SPX is at 2375 and 2368. Near term resistance is at 2392 and 2400.

Europe is pointing higher in early trade, and U.S. Futures are also moderately higher in the premarket. We’ll see another deluge of economic reports today, with Housing Starts/Building Permits at 8:30am, Initial/Continuing Jobless Claims also at 8:30am, Philadelphia Fed numbers at 8:30am, JOLTS Job Openings at 10:00am, and Natural Gas Inventories at 10:30am.

The SPDR Dow Jones Industrial Average ETF (NYSE:DIA) rose $0.62 (+0.3%) in premarket trading Thursday. Year-to-date, DIA has gained 6.11%, versus a 6.90% 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 #5 of 74 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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