Stocks Look Poised For More Gains After A Healthy Six-Day Consolidation

Market technician Dave Chojnacki of Street One Financial recaps Wednesday’s low-volume market action, and updates the technical levels that investors and traders should focus on as we head into the holidays.

A Low-Volume Sell-Off

The Market opened flat to slightly lower yesterday. A slightly better than expected Existing Housing Sales did little to give the indices a push to the upside. The major averages traded in a very narrow range for most of the session, as volume was extremely weak. The holiday feel appeared to be hitting the trading floor. Perhaps even the high-frequency trading robots know that it’s time to take a break.

The last hour saw a sell-off, as the indices ended near their lows of the day. All in all, however, there was little change to the downside. At the close, the DJIA fell 32.6 points, the SPX slipped 5.5 points, and the NDX inched down 4.9 points. Breadth was slightly negative, 1.14 to 1, on weak volume.

Technicals Show Weakening Momentum

ROC(10)’s declined significantly, once again indicating the slowing of momentum. All three major indices’ ROCs did remain in positive territory, however.

RSI’s fell somewhat, but remain at bullish levels. All three major indices remain with their MACD above signal, but it is beginning to decline.

The ARMS index ended the day at 1.61, a fairly bearish indication. This was witnessed by the last hour sell-off. The indices traded in a very narrow range Wednesday, with the S&P only moving in a 6 point range. It was the 6th straight session that the averages moved very little, which is a healthy consolidation as they set up for more upside.

The DJIA and NDX developed a ‘Doji’ in the session. This happens when an index develops a trading range in the session, but then closes near the opening price. Near term bias to the upside remains strong. The NDX is comfortably above its 20D-SMA of 4866. The SPX and DJIA are comfortably above their 20D-SMA’s of 19516 and 2233, respectively.

The VIX continued its fall, ending at 11.27 down 1.5%. Near term support for the NDX is at 4925 and 4909. Near term resistance is at 4966 and 4975. Near term support for the SPX is at 2262 and 2250. Near term resistance is at 2277 and 2292.

Thursday Preview

Europe is down in early trade, while U.S. Futures are pointing slightly lower in the pre-market. We actually have a slew of economic data on tap today with the GDP, Initial/Continuing Jobless Claims, and Durable Orders numbers all due at 8:30am. Next, Leading Indicators and Personal Income/Spending data will be released at 10:00am, and finally Natural Gas Inventories come at 10:30am.

The SPDR Dow Jones Industrial Average ETF (NYSE:DIA) was unchanged in premarket trading Thursday. Year-to-date, the only ETF tied to the DJIA has gained 14.47%.


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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