Dow Jones Industrial Average Might Be Stuck In A Holding Pattern Until Friday

Market technician Dave Chojnacki of Street One Financial takes a look at Monday’s sell-off in the equities markets that came on very low volume, and speculates that investors may be waiting for Friday’s employment numbers to make their next moves.

The market opened the session to the downside on Monday, as geo-political news and news out of Washington over the weekend was weighing on investors’ minds. The selling was orderly, as volume was low.

Factory Orders came in lower than expected and helped push prices lower as the morning progressed. The major indices attempted to make a comeback in the afternoon, but there was not enough interest by traders to push the averages into positive territory. By the final bell, the indices ended with small losses.

At the close, the DJIA fell 0.24%, the SPX gave up 0.33%, and the NDX lost 0.25%. Breadth was decidedly negative, 2 to 1, on weak volume. ROC(10)’s declined, but remain in positive territory for all three major indices.

RSI’s pulled back somewhat, with the DJIA the only index remaining in the 70’s, at 72.6. The NDX and SPX fell into the upper 60’s, losing some of the overbought pressure. The NDX remains the only major index with its MACD below signal. The ARMS index ended the day at 1.38, a bearish level.

With the major indices at record levels, and overbought near term, a slight pullback can be expected. Materials and Financials were the biggest losers in the session, which saw extremely light volume. We may well see similar weak volume for the remainder of the week as well.

We’ll Employment Numbers on Friday, and investors may wait to see those numbers before taking any major positions. We will be watching the 20D-SMA’s for near term support: DJIA-20614, NDX-5299, SPX-2347. IWM (small-caps) lost 0.69% to end at 137.70, indicating a broad loss across equities. GLD (Gold), as expected, had problems with resistance at the 120.00 level, and has been retracing ever since hitting that level. The VIX added 2.5% to 11.24, still a very low reading.

Near term support for the NDX is at 5350 and 5325. Near term resistance is at 5362 and 5375. Near term support for the SPX is at 2375 and 2362. Near term resistance is at 2388 and 2400.

Europe is mixed in early trade, while U.S. Futures are pointing slightly lower in the pre-market. In terms of major economic data on tap today, we’ll see Trade Balance numbers at 8:30am and Consumer Credit at  3:00pm.

The SPDR Dow Jones Industrial Average ETF (NYSE:DIA) fell $0.09 (-0.04%) in premarket trading Tuesday. Year-to-date, DIA has gained 6.06%, versus a 6.34% 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 75 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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