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Have Stocks Hit A Temporary Top?

Market technician Dave Chojnacki of Street One Financial examines the market’s recent failure to break out to new highs last week, and what it could mean as we progress through the next few days.

Super Bowl Hangover

After an absolutely amazing Super Bowl game, Monday’s market action paled in comparison. With no economic news to move equities, traders focused on Draghi’s (ECB chairman) statement promising more QE. Investors were cool to his words, as the major indices moved lower through the morning hours.

An attempt to move higher mid-afternoon worked for the NDX, but the DJIA and SPX remained in negative territory. The indices finished mixed and little changed. At the close, the DJIA fell 19 points, the SPX slipped 4.8 points, and the NDX inched up 6.3 points. Breadth was negative, 1.5 to 1, on below average volume.

Technicals Show Averages In Limbo

ROC(10)’s advanced across the board and continued in positive territory. RSI’s were mixed, with the NDX the only index higher, ending at 69.5. The DJIA and SPX MACD continue below signal. The NDX MACD remains above signal. The ARMS index ended the day at 1.28, slightly bearish.

Last Friday, the indices attempted to break-out of the range and to test their record highs. Monday’s dull session left the averages in limbo. Was this session a brief halt or have we hit a temporary top? Technicals suggest there is more upside, and we will look for confirmation in the next few sessions.

All three major indices remain above their 20D-SMA, which has been support since the end of December, especially for the DJIA and SPX. The SPX traded in an 8 point range, holding above the 20D-SMA of 2278. The 50D-SMA is at 2257, but 2250 remains the bottom support of the ‘Bull Handle’. The NDX continues comfortably above its 20D-SMA of 5097. It closed yesterday just 1 point below its recent closing high of 5168 and just 5 points below its intraday high of 5172.

The VIX finished up 3.1% to 11.32. Near term support for the NDX is at 5150 and 5125. Near term resistance is at 5168, 5172 and 5188. Near term support for the SPX is at 2288 and 2278. Near term resistance is at 2298 and 2300.

Tuesday Preview

Europe is moderately higher in early trade, while U.S. Futures are pointing higher pre-market. On tap today in terms of economic reports are the Trade Balance numbers at 8:30am and the Jolts Job Openings at 10:00am.

Other than those data points, traders will focus on earnings results from companies like General Motors, ADM, BP, and Michael Kors, among many others.

The SPDR Dow Jones Industrial Average ETF (NYSE:DIA) rose $0.52 (+0.26%) in premarket trading Tuesday. Year-to-date, DIA has gained 1.40%, versus a 2.42% 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 #6 of 76 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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