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Keep An Eye On This Important Technical Indicator For The S&P 500

Technical analyst Dave Chojnacki recaps Thursday’s market action, which marked the seventh straight day of healthy consolidation for the major U.S. indexes, and updates the technical levels to watch out for as the markets break for Christmas.

Low Volume Thursday

We got a better than expected GDP number yesterday morning, but Initial Claims and Durable Orders came in way below expectations. This set the stage for equities to open lower and trend downward for the AM hours.

The major indices attempted to make a comeback in the afternoon, but fell short and ended lower on the day. Once again, the averages traded a in a very narrow range on low volume. Volume did increase somewhat over the prior session, however.

At the close, the DJIA lost 23 points, the SPX fell 4.2 points, and the NDX slipped 14.5 points. Breadth was slightly negative, 1.4 to 1, on below average volume. ROC(10)’s declined, but remained in positive territory. Momentum continues to wane as we approach the end of the year.

Monitor The SPX’s MACD

RSI’s fell, but remain at bullish levels. The SPX had its MACD cross below signal, indicating the recent weakness. The MACD provides an excellent near term signal, so we need to keep an eye on this. The DJIA and NDX remain with their MACD above signal. The ARMS index ended the day at 1.29, a slightly bearish indication.

This was the 7th session of sideways trading, lowering momentum and falling volume. Some of this may just be a pause and low volume may be a result of the upcoming holiday week. The sideways action is developing a ‘Bull Handle’ on the charts, which typically signifies additional movement to the upside.

Bias continues to the upside with critical near term support at: DJIA-19500, NDX-4723, SPX-2187. The NDX 20D-SMA is at 4870 and the SPX is at 2236. The SPX remains only 11 points below its all-time closing high(2271) established on 12/13.

After falling for 5 straight sessions, the VIX managed to find a bottom yesterday. It was up 1.4% to finish at 11.43.

Near term support for the NDX is at 4925 and 4909. Near term resistance is at 4953 and 4961. Near term support for the SPX is at 2250 and 2236. Near term resistance is at 2271 and 2277.

Last Trading Day Before Three-Day Weekend

Europe is mixed in early trade this morning, while U.S. Futures are pointing slightly lower in the premarket. We’ll see a couple of pieces of economic data out this morning, with the University of Michigan Sentiment numbers and New Home Sales data both due at 10:00am.

As a reminder, the markets will be closed on Monday, Dec. 26 in observance of the Christmas holiday.

The SPDR S&P 500 ETF Trust (NYSE:SPY) posted slight gains in premarket trading Friday. Year-to-date, SPY has posted a total return of 11.89%.

SPY currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #1 of 108 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.

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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