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Technicals Suggest Continued Strength For The Dow This Week

Market technician Dave Chojnacki of Street One Financial examines last week’s big rally for the major averages, and updates the important technical levels for these Trump-fueled markets.

Even More All-Time Highs

Equities opened higher on Friday, as investors were following through on the prior session’s record setting strength. Weaker than expected Michigan Sentiment numbers (95.7), did little to hold back the major indices.

The averages traded nearly sideways through the PM session, but held onto their moderate gains to finish at new highs. Breadth and volume was somewhat stronger than usual, giving conviction to the session. At the close, the DJIA was up 0.48%, the SPX gained 0.36%, and the NDX added 0.38%.

Breadth was decidedly positive, 2.7 to 1, on average volume. ROC(10’s) advanced in the session and continued in positive territory. The ARMS Index ended at 1.13, just slightly bearish at the close.

For the week, the DJIA was up 0.9%, the SPX added 0.8%, and the NDX was up 1.2%. The DJIA and SPX tried, once again, to break-out of the 9 week trading range.

The VIX was little changed for the week, ending at 10.85. Volatility remains extremely low.

Trading Trends

Long term, the upside bias continues, as the major averages moved to new record highs last week. Volume during the week was below average, however, lending little conviction to the break-out. Still, there was some pickup in volume on Friday.

The major indices remain comfortably above their longer term 20WK SMA’s: DJIA-19216, SPX- 2215, NDX- 4916. Short term, the bias continues to the upside as the averages remain well above their 50% retracement levels. Near term, the recent highs continue to lend credence to more upside in the near term.

Critical near term support for the SPX is 2233 and 5086 for the NDX. IWM (Russell 2000 small-caps) has still not participated in new highs. We’ll look for confirmation this week.

Europe is moderately higher in early trade, and U.S. Futures are pointing higher in the morning session. We’ll get PPI, CPI, Retail Sales and Housing numbers this week, but there aren’t any major reports due out today.

The SPDR Dow Jones Industrial Average ETF (NYSE:DIA) rose $0.45 (+0.22%) in premarket trading Monday. Year-to-date, DIA has gained 2.65%, versus a 3.57% 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 #6 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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