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Stock Momentum Is Waning As We Close Out 2016

Technical analyst David Chojnacki brings us his daily market technicals update, which includes some healthy sideways consolidation over the past few sessions that could be setting up more gains ahead.

Monday Recap

The market opened Monday moving to the upside with no major economic news as a catalyst. By late morning, equities began to reverse. There was some breaking news of a terrorist attack in Turkey, which may have had some impact in reversing the trend. The major indices did recover, however, and traded in a choppy manner the remainder of the session. Late in the session, another Terror attack in Germany seemed to have a negative impact on the markets.

The Nasdaq 100 (NDX) did trade at a new intraday high, before closing just below its recent closing high of 4935. All in all, the averages ended with small gains on the day. At the close, the Dow Jones Industrial Average (DJIA) and S&P 500 (SPX) were up 0.2%, and the NDX gained 0.41%. Breadth was positive, 1.7 to 1, on low volume.

Technical Update

ROC(10)’s declined but remained in positive territory. This is an indication of the waning market momentum. RSI’s moved slightly higher, with the DJIA continuing to be the strongest at 79.8. The Dow remains in overbought territory.

All three major indices remain with their MACD above signal. The ARMS index ended the day at 1.42, a bearish reading. The market has moved sideways in the last 4 sessions, performing a healthy consolidation, however, and this sets up the major averages for more gains. With the upcoming holidays, we are entering a slowing time for the markets. There may, however, be some managers attempting to catch up on equities before year-end.

The NDX closed within 1 point of its earlier high, and traded at a new intraday high of 4963. The NDX is comfortably above its 20D-SMA at 4857. The SPX closed right at the 2262 target level and now becomes support. The target of 2277 and last week’s intra-day high continues to be resistance on the upside.

The VIX fell 4% to 11.71, displaying very little volatility as we approach the end of the year.

Near term support for the NDX is at 4925 and 4909. Near term resistance is at 4935 and 4960. Near term support for the SPX is at 2262 and 2250. Near term resistance is at 2277 and 2292.

Tuesday Preview

Europe is up slightly in early trade this morning, while U.S. futures are pointing higher in the premarket. Investors can expect volume to continue to fall throughout the week as Christmas approaches, barring any unforeseen hiccups.

The SPDR Dow Jones Industrial Average ETF (NYSE:DIA) rose $0.57 (+0.29%) to $199.17 in premarket trading Tuesday. Year-to-date, the only ETF tied to the DJIA has gained 14.14%.

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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