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Stocks Are Overbought, But Still Well Above Support Levels

Market technician David Chojnacki of Street One Financial brings us his daily technical update, in which the major U.S. indexes exhibit continued strength despite staying in overbought territory.

Economic numbers, such as the Philly FED and Empire Manufacturing, were better than expected yesterday morning. This set the stage for equities to move higher at the open and ignore the prior session’s weakness.

The major indices moved higher through the morning, but after the European markets closed, stocks reversed direction and slid down into the close. They managed to hold onto only small gains going into the closing bell. At the close, the DJIA added 0.3%, the SPX was up 0.39%, and the NDX gained 0.25%.

Breadth was slightly positive, 1.2 to 1, on above average volume. ROC(10)’s were mixed, with the DJIA and NDX declining and the SPX advancing. All three remained in positive territory.

RSI’s moved higher with the DJIA remaining the strongest with a 79.6 reading. The Dow remains in overbought territory. All three major indices remain with their MACD above signal. The ARMS index ended the day at 0.88, a slightly bullish reading.

After the FOMC sell-off on Wednesday afternoon, the major indices displayed resilience yesterday and managed to register small gains. They did seem to meet resistance early in the session near recent highs. The DJIA traded as high as 19951, just 15 points below Tuesday’s intraday high of 19966. It closed at 19852. The SPX traded as high as 2272 just 5 points off its intraday high of 2277. It closed the day right at the near term support level of 2262.

The NDX traded within 1 point of Tuesday’s intraday high of 4960. It remains comfortably above the critical near term support of 4909. The US Dollar continued to move higher with UUP (PowerShares DB) hitting a new multi-year high of 26.66. The VIX slipped 3% to finish at 12.79.

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.

Europe is up moderately in early trade, while U.S. Futures are slightly higher in the premarket. The only piece of economic news on tap today is the Housing Starts/Building Permits number at 8:30am.

The SPDR S&P 500 ETF Trust (NYSE:SPY) fell $0.78 (-0.34%) to $226.03 in premarket trading Friday. Year-to-date, the largest ETF tied to the benchmark S&P 500 index has gained 11.25%.

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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