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Don’t Worry About The Dow’s Consolidation, It’ll Probably Lead To New Highs

Technical analyst Dave Chojnacki of Street One Financial recaps last week’s market developments and updates the technical levels that investors and traders should focus on for the major indexes as we open the first week of a Trump presidency.

Options Expiration Moves Some More Than Others

On little news to move the market at the open on Friday, traders pushed prices slowly higher. With options expiring at the close, some of the action was obviously options related.

The major averages pulled back somewhat after the first hour, but held onto the gains at the close. The gains were moderate, however, the Nasdaq 100 (NDX) once again made new highs. There were no major surprises in President Trump’s inaugural speech, yet we saw equities take a small drop after the speech (classic “sell the news” pattern). At the close, the Dow (DJIA) added 0.48%, the S&P 500 (SPX) gained 0.34%, and the NDX was up 0.24%. Breadth was positive, 2 to 1, on above average volume.

Technicals Stay Mixed

ROC(10’s) were mixed in the session. The ARMS Index ended at 0.79, a bullish reading. For the week, the DJIA fell 0.2%, the SPX slipped 3 points, and the NDX gained just 4 points. It was the second week that the major averages changed very little.

The VIX finished Friday at 11.54, down 9.7%. For the week, the VIX was up just 2.7%.

Long term, the upside bias continues. The NDX made new highs once again, closing at 5063 and trading as high as 5085. The DJIA and SPX continue consolidating since early December and are poised to make new highs. The NDX and SPX remain comfortably above their 200D-SMA’s of 4694 and 2150, respectively.

Short term, the bias continues to the upside as the averages remain well above their 50% retracement levels. Near term, the consolidation in the DJIA and SPX continues. The SPX is just 5 points below its closing high of 2276. Critical near term support is 2232. Critical near term support for the NDX is 4995. The top of the NDX Bollinger Band sits at 5108, so we may expect to see some resistance there.

Earnings Take Center Stage

Europe is lower in early trade this morning, while U.S. Futures are pointing slightly lower in the premarket. We won’t see any major economic reports today, so earnings from key companies like Halliburton and McDonald’s will be key drivers of stock movements.

Later in the week, we’ll see some key numbers, including GDP, Durable Orders, and Existing Home Sales.

The SPDR Dow Jones Industrial Average ETF (NYSE:DIA) fell $0.23 (-0.12%) in premarket trading Monday. Year-to-date, DIA has gained 0.23%, versus a 1.44% 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 77 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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