Technical analyst Dave Chojnacki of Street One Financial examines Tuesday’s mixed market action, and updates important technical levels to watch as the Trump transition keeps markets stuck in a tight range.

Tuesday Kicks Trading Week Off With A Dud

Weak Empire Manufacturing numbers and a weak Dollar had equities opening to the downside yesterday. This time all three major averages were in sync, moving lower. The indices tried to correct after the first hour. After a small move to the upside equities traded sideways till the last two hours.

Equities then continued to fall into the final bell, ending with small losses. At the close, the Dow Jones (DJIA) and S&P 500 (SPX) fell 0.3%, and the Nasdaq 100 (NDX) gave up 0.39%. Breadth was slightly negative, 1.2 to 1, on below average volume.

Technicals Reflect Expected Transition Trepidation

ROC(10)’s were mixed, with the DJIA declining and the NDX and SPX advancing. They remain in positive territory. RSI’s moved lower with the NDX remaining the strongest at 64.6. MACD’s remain below signal for the DJIA and SPX and above signal for the NDX.

The ARMS index ended the day at 1.03, a neutral reading. The major indices have seen choppy action in the last few sessions, but remain in a narrow trading range. The DJIA and SPX have been in a tight range since the beginning of December.

In yesterday’s action, all three major averages developed ‘Doji’ candlesticks in the session. This is typically a reversal of direction indicator. It also means that traders are indecisive, which is perfectly normal heading into a transition of power in Washington.

The DJIA is the only major index which is below its 20D-SMA of 19892. The NDX and SPX 20D-SMA’s are 4968 and 2264, respectively. Near term bias remains positive, as we move sideways within striking range of all-time highs. In yesterday’s session, the biggest weakness was in small-caps. We saw this in the IWM (Russell 2000) ETF which lost 1.36%.

The VIX gained 5.7% to finish at 11.87. Near term support for the NDX is at 5025 and 5000. Near term resistance is at 5050 and 5075. Near term support for the SPX is at 2263 and 2250. Near term resistance is at 2271 and 2276.

Wednesday Preview

Europe is mixed in early trade, while U.S. Futures are pointing slightly higher in the pre-market. We’ll see a number of important economic reports today, including CPI numbers at 8:30am, Industrial Production/Capacity at 9:15am, NAHB Housing Index at 10:00am, and the Fed Beige Book at 2:00pm.

The SPDR S&P 500 ETF Trust (NYSE:SPY) rose $0.50 (+0.22%) in premarket trading Wednesday. Year-to-date, the largest ETF tied to the S&P 500 index has gained 1.48%.

SPY currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #1 of 109 ETFs in the Large Cap Blend 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.

Powered by WPeMatico