Summer Malaise Saps The Dow Jones Industrial Average


Technical analyst Dave Chojnacki of Street One Financial wraps up the trading week with an update on the important technical levels for the major U.S. averages, as the summer doldrums appear to be sapping all the volume out of the markets.

Economic numbers on Thursday met expectations with no big surprises. The major averages had little reaction to the numbers and opened flat. A late morning rally held through most of the day, but a sell-off ensued in the last hour.Volume was weak again as we are appearing to settle into the summer doldrums. While the major averages finished slightly lower, the breadth was positive as we saw small caps finishing with a small gain. Healthcare was the one sector which was strong on the day.At the close, the Dow Jones Industrial Average (DJIA) fell 12.7 points, the S&P 500 (SPX) slipped 1.1 points, and the Nasdaq 100 (NDX) inched down 2.5 points. Breadth was positive, 1.4 to 1, on light volume.

ROC(10)’s declined with the NDX the only index of the big three continuing in negative territory. RSI’s fell slightly and the DJIA remains the strongest index at 62.9. The NDX and SPX remain in the mid 50’s. The SPX and the NDX remain with their MACD below signal. The DJIA MACD continues above signal. This continues near term caution for the SPX and NDX. The ARMS index ended the day at 0.95, which is nearly neutral.

All in all, it was a dull session, with the major indices ending with little change to the downside. The DJIA continues to hold its 20D-SMA of 21249, but it is inching closer to that support level.

The SPX continues to find support at the 20D-SMA of 2431. While it continues to be comfortably above critical near term support of 2352, we stress near term caution with a MACD below signal. The NDX traded above its 20D-SMA of 5785 in the session, but could not hold that level going into the close.

The gains in small-caps were reflected in the IWM (iShares Russell 2000), which was up 0.38% to 139.98. The VIX fell 2.7% to finish at 10.45.

Near term support for the NDX is at 5775 and 5750. Near term resistance is at 5785 and 5800. Near term support for the SPX is at 2431, 2425 and 2412. Near term resistance is at 2450, 2452 and 2462.

Europe is moderately lower in early trade Friday, and U.S. Futures are mixed in the premarket. The only major economic report on tap for today is New Home Sales at 10:00am.

The SPDR Dow Jones Industrial Average ETF (NYSE:DIA) fell $0.52 (-0.24%) in premarket trading Friday. Year-to-date, DIA has gained 8.21%, versus a 8.64% 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 76 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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