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Narrowing Technicals For The Dow Jones Industrial Average Signal A Big Move Coming

Market technician Dave Chojnacki of Street One Financial recaps Tuesday’s anemic market action and notices some technical narrowing that portends a potentially big move coming for stocks in the near future.

Decent economic reports on the Trade Balance and Factory Orders early Tuesday were ignored by traders, as the averages slipped lower in morning trade. After the first hour, equities began to turn around, however, and gradually moved higher.

Energy and Materials caught a bid and helped to move the DJIA higher in the session. The PM trade was choppy, in a narrow range, and not very exciting. The major indices did manage to finish in positive territory and near their highs of the session. At the close, the DJIA added 39 points, the SPX inched up 1.3 points, and the NDX up 8.2 points. Breadth was slightly positive, on below average volume.

ROC(10)’s advanced in the session, with the DJIA and SPX crossing back into positive territory. The NDX also remains in positive territory. RSI’s moved slightly higher, with the NDX continuing to be the strongest at 65.7.

All three major averages remain with their MACD below signal. The ARMS index ended the day at 0.87, a slightly bullish reading. It was another lethargic session, with equities trading in a very narrow range and ending little changed.

The DJIA was the strongest index in the session, as the Trump Trade sectors (Energy and Materials) were strong. Once again, the DJIA and SPX traded around their 20 and 50D moving averages. The DJIA 20D-SMA: 20763, 50D-20566, SPX-20D-2362, 50D-2343.

Critical near term support for the DJIA is 20412 and 2322 for the SPX. The NDX continues comfortably above its 20D-SMA of 5395 and just below its Bollinger band top of 5458. Bollinger Bands continue to narrow, which portends a coming move to either the upside or downside.

GLD (SPDR Gold) added 0.27 to close at 119.62. After three days of moving to the upside, the VIX fell 5.4% to 11.71.

Near term support for the NDX is at 5425 and 5400. Near term resistance is at 5450, 5458 and 5475. Near term support for the SPX is at 2350 and 2341. Near term resistance is at 2362 and 2375.

Europe is mixed in early trade, and U.S. Futures are mixed in the premarket. Major economic reports out today include the ADP Employment numbers at 8:15am, ISM Services at 10:00am, Crude Inventories at 10:30am, and FOMC Minutes at 2:00PM.

The SPDR Dow Jones Industrial Average ETF (NYSE:DIA) was unchanged in premarket trading Wednesday. Year-to-date, DIA has gained 4.63%, versus a 5.35% 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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