Strong Market Technicals Point To More Gains Ahead For Stocks

Market technician Dave Chojnacki of Street One Financial examines Friday’s solid market rally despite a weak report from a technology titan, and previews the trading week ahead from a technical perspective.

Amazon’s Plunge Can’t Hold Averages Down

Despite disappointing numbers from Amazon on Friday, a good Employment Report had investors buying right from the opening bell. Equities gapped up at the open and momentum continued to build throughout the session.

Financials were the leaders on the day, as the White House called for loosening of Dodd-Frank rules. The DJIA and SPX were up significantly on the day. The NDX was held back somewhat by AMZN, however, which lost 3.5% in the session.

At the close, the DJIA gained 0.94%, the SPX was up 0.73%, and the NDX adding 0.27%. Breadth was decidedly positive, 4 to 1, on average volume. ROC(10’s) advanced in the session. The ARMS Index ended at 1.04, a neutral reading. For the week, there was little change. The DJIA was down 32 points, the SPX added 3 points, the NDX slipped 7 points. Despite the small change, the averages are just below record highs. The VIX finished Friday at 10.97, down 8%, but up 3.6% for the week.

Technicals Remain Bullish

Long term, the upside bias continues as the major indices remain near record highs. After a brief pullback, the major averages are once again poised to break–out of the 2 month range. The SPX and NDX are comfortably above their 200D-SMA’s of 2161 and 4725, respectively.

Short term, the bias also continues to the upside as the averages remain well above their 50% retracement levels. We continue to be in the 5th Elliott Wave, as equities are set to move higher.

Near term, we look at recent highs to be resistance: NDX-5168, SPX-2298, DJIA-20100. Critical near term support for the SPX is 2233 and 4995 for the NDX. IWM (Russell 2000) had a good day Friday ending at 136.87, it remains just below its December high of 138.92.

Monday’s Muted Outlook

Europe is mixed in morning trading, while U.S. Futures are pointing lower. This week will be light for economic reports, and today’s calendar features nothing notable on that front. Thus, the market will focus largely on major earnings reports to move the averages around.

The SPDR S&P 500 ETF Trust (NYSE:SPY) fell $0.34 (-0.15%) in premarket trading Monday. Year-to-date, SPY has gained 2.60%, versus a % rise in the benchmark S&P 500 index during the same period.

SPY currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #1 of 109 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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