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Fed-Spooked Financials Help Send The Dow Jones Industrial Average Lower

Market technician Dave Chojnacki of Street One Financial examines Wednesday’s big Fed-fueled intraday reversal, and updates the key technical levels for the major U.S. indexes that investors should focus on.

Good ADP Employment numbers helped to get equities off to a good start on Wednesday. We were looking for a strong move to get out of the recent range bound trade.

Tech stocks were back in command and helping to push the major indices higher. The major averages were up 0.5% to 0.75% going into the highly important FOMC minutes release at 2pm. After the release of the notes, investors were somewhat surprised by the Hawkish remarks and talk of unwinding the Fed’s balance sheet.

The indices fell precipitously in the last two hours, as a result, giving back all their gains and falling into negative territory. At the close, the DJIA fell 41 points, the SPX lost 0.31%, and the NDX gave up 0.4%. Breadth was negative, 2 to 1, on above average volume.

ROC(10)’s declined in the session, with the DJIA crossing back into negative territory. The SPX and NDX remained in positive territory. RSI’s moved lower, with the NDX still the leader at 59.6. The DJIA and SPX are in the 40’s. All three major averages remain with their MACD below signal. The ARMS index ended the day at 1.41, a bearish reading.

It was a tale of two sessions on Wednesday, with a strong move to the upside followed by an abrupt reversal and move to the downside. Financials were one of the big losers in the session. XLF (SPDR Financials) was off 0.76% to close at 23.47. This was a direct response to the FOMC minutes.

The DJIA and SPX crossed above their 20D-SMA’s (20752 and 2362, respectively) early in the session, but then fell below at the close. The NDX remains above its 20D-SMA of 5398, but came dangerously close yesterday. All three major indices developed an ’inverted hammer’ candlestick, which may indicate more weakness near term.

The VIX spiked 9.3% to end at 12.89. Near term support for the NDX is at 5400, 5398 and 5375. Near term resistance is at 5425 and 5450. Near term support for the SPX is at 2350 and 2344. Near term resistance is at 2362 and 2375.

Europe is mostly lower in early trade Thursday, but U.S. Futures are slightly higher in the premarket. We’ll see two pieces of important economic data released today, namely, Initial/Continuing Jobless Claims at 8:30am and Natural Gas Inventories at 10:30am.

The SPDR Dow Jones Industrial Average ETF (NYSE:DIA) rose $0.12 (+0.06%) in premarket trading Thursday. Year-to-date, DIA has gained 4.43%, versus a 5.03% 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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