Technical analyst Dave Chojnacki of Street wraps up the trading week with a deep look at the technicals of the major U.S. indexes, which indicate some potential near-term weakness but a strong bounce off of key support levels.

The market opened flat yesterday and traded in a narrow and choppy range through most of the morning hours. Equities continued to be flat until a sell program in the early PM hours.

The major averages tested some key technical levels, and then rebounded before the close. Once again, the volume was missing and the indices ended little changed, but slightly to the upside. As we predicted earlier this week, investors seemed to be waiting for Friday’s Employment Report before making any major moves.

At the close, the DJIA added 2.4 points, the SPX inched up 1.9 points, and the NDX was up 4.1 points. Breadth was decidedly negative, 2.3 to 1, on below average volume. ROC(10)’s were mixed, with the DJIA the only index declining in the session. All three major averages remain in positive territory.

RSI’s were little changed and remain in the 60’s for all three major indices. The NDX continues as the strongest index near term at 68.5. All three major averages remain with their MACD below signal. This portends more additional near term weakness.

The ARMS index ended the day at 0.62, a fairly bullish reading. This is now the 6th session since last week’s highs that the major averages have been consolidating. We expect investors to be interested in today’s Employment Report as an indicator of future rate hikes. It appears that a March hike is likely, and the Report may give an indication of the number of hikes in the future.

The averages were testing or near their 20D-SMA’s yesterday, which is key near term support. 20D-SMA’s- DJIA-20736, SPX-2358, NDX-5325. The IWM (small caps) fell below its 50D-SMA closing at 135.36.

The VIX added 3.7% to 12.30 yesterday, as the volatility gauge remains historically low but is in a short-term uptrend.

Near term support for the NDX is at 5362 and 5350. Near term resistance is at 5375 and 5388. Near term support for the SPX is at 2362 and 2358. Near term resistance is at 2375 and 2388.

Europe is moderately higher in early trade, and U.S. Futures are also pointing higher in the pre-market. As mentioned earlier, the key Employment Report will come at 8:30am. We’ll also see the latest Treasury Budget numbers at 2:00pm, just before we head into the weekend.

The SPDR Dow Jones Industrial Average ETF (NYSE:DIA) rose $0.73 (+0.35%) in premarket trading Friday. Year-to-date, DIA has gained 5.65%, versus a 5.96% 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.

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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.

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