IBM’s Weak Earnings To Weigh On Dow Jones Industrial Average


Technical analyst Dave Chojnacki of Street One Financial recaps Tuesday’s mixed market action that saw tech stocks boosted by a hugely bullish reaction to a single earnings report, and notes that the Dow could be hurt today by IBM’s weak numbers.

Equities opened lower on Tuesday as economic reports were weaker than expected. News of problems in D.C. with the Healthcare Bill also weighed on the market.Netflix (NFLX) reported strong subscription numbers, moving its price higher and helping Tech and the Nasdaq 100 (NDX) rise. The major indices moved higher in the afternoon, as the averages ended near their highs of the session.The averages were mixed, however, with the NDX moderately higher, the S&P 500 (SPX) only slightly positive, and the Dow Jones Industrial Average (DJIA) closing with a small loss. The NDX is now up 8 straight sessions. Meanwhile, the small gain for the SPX resulted in a new closing high.

At the close, the DJIA fell 54.9 points, the SPX added 1.4 points, and the NDX was up 0.69%. Breadth was slightly negative, on below average volume. ROC(10)’s were mixed, with the DJIA and SPX declining and the NDX advancing. All three remain in positive territory.

RSI’s were also mixed with the DJIA falling to 60.7 and the SPX rising to 62.8. The NDX RSI moved to 63.3, taking the lead from the DJIA. All three MACD’s continue to remain above signal. The ARMS index ended the day at 1.34, a bit surprising since the averages closed near their highs.

NFLX and the Techs were the stars of the day, scoring the biggest gains. The NDX still remains 5 points below its early June closing high of 5885, and 15 points below its record intraday high was 5895. It remains comfortably above its 20 and 50D-SMAS’s.

The DJIA continues above its 20D-SMA of 21445. The SPX met resistance in the session right at its Bollinger Band® of 2460 and is holding above its 20D-SMA of 2435.

The VIX added 0.07 of a point to finish at 9.89.

IBM reported lower revenue last night, and is trading down 2.8% in the premarket Wednesday, so that could be a drag on the Dow today. Note that IBM is the fifth highest weighted stock in the 30-stock price-weighted index.

Near term support for the NDX is at 5850 and 5825. Near term resistance is at 5885 and 5895. Near term support for the SPX is at 2450 and 2435. Near term resistance is at 2460, 2462 and 2475.

Europe is higher in early trade Wednesday, but U.S. Futures are mixed in the premarket. Major economic reports on tap today include Housing Starts at 8:30am and the EIA Report at 10:30am.

The SPDR Dow Jones Industrial Average ETF (NYSE:DIA) was unchanged in premarket trading Wednesday. Year-to-date, DIA has gained 10.45%, versus a 10.92% 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 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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