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Dow Jones Industrial Average On Ice As Markets Await Fed Decision

Market technician Dave Chojnacki of Street One Financial reviews Tuesday’s market action and updates the important technical levels to focus on in the U.S. markets, as investors anxiously await today’s all-important Fed rate hike decision.

The market moved lower at the open yesterday, and fell through the first hour and a half. The PPI number came in higher than expected at 0.3, and was a good number if you are looking to combat deflation. The remainder of the session saw equities trade in a narrow and choppy range with little volume.

It was not atypical of recent trading action we’ve seen, with Energy and Industrials the weakest sectors. By the end of the session, the major indices were slightly lower. At the close, the DJIA fell 44.1 points, the SPX slipped 8 points, and the NDX gave up 12.4 points.

Breadth was negative, 2 to 1, on weak volume. ROC(10)’s were mixed, with the DJIA and SPX declining in the session, and the NDX advancing, but all three major averages remain in positive territory there. RSI’s were little changed with the averages remaining in bullish territory, and the NDX the strongest at 68.5. All three major averages remain with their MACD below signal.

The ARMS index ended the day at 1.39, a bearish level. The major averages had another lethargic session with weak volume and minor changes. All three major indices tested or came close to their 20D-SMA’s in the session. The DJIA and SPX traded below their 20D in the session and the SPX actually closed a point below. The DJIA closed 13 points above its 20D-SMA of 20824. We have been stressing how key the 20D has been for support since the recent rally began in early November.

Breadth in yesterday’s session was widespread to the downside, despite the losses staying small. We have now been in a narrow range for the last 16 days, and the longer that continues, the bigger the potential breakout to the upside or downside could be. The SPX has traded between 2352 and 2400 in that timeframe, which is very tight.

The VIX spiked 7.9% to 12.25 yesterday, as volatility perked up a bit before today’s Fed decision. Near term support for the NDX is at 5375 and 5349. Near term resistance is at 5388 and 5398, 5400. Near term support for the SPX is at 2362 and 2358. Near term resistance is at 2366 and 2375.

We expect to get a rate hike at today’s FOMC meeting, as the market is pricing in near certain odds of higher rates. Europe is slightly higher in early trade, while U.S. Futures are pointing higher in the premarket.

Along with the Fed decision at 2pm, we’ll also see a slew of other important economic reports today. Retail Sales will be released at 8:30am, as will Empire Manufacturing numbers. Business Inventories hit the wires at 10:00am anlong with NAHB Housing Index data, and Crude Inventories will drop at 10:30am.

The SPDR Dow Jones Industrial Average ETF (NYSE:DIA) rose $0.34 (+0.16%) in premarket trading Wednesday. Year-to-date, DIA has gained 5.58%, versus a 5.98% 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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