The Bullish Bias Is Back For The Dow Jones Industrial Average

U.S. equities look poised for another strongly bullish open today, following through on yesterday’s massive rally. Market technician Dave Chojnacki of Street One Financial recaps the big move and updates the important technical levels to focus on as the markets return to “risk on” mode.

The market opened the day yesterday (and the week) on a strong note to the upside. We can thank the French elections and news from Washington for equities gapping up on Monday.

The major indices saw most sectors turning higher during the day, but especially a strong Financial sector. Talk of tax cuts was a real boost to Banks.

The averages were near their highs early in the session and trended sideways, to slightly higher, for the remainder of the session. The Nasdaq 100 (NDX) broke out to new highs, and all three major indices had significant gains at the final bell. At the close, the Dow Jones Industrial Average (DJIA) and S&P 500 (SPX) were up 1%, and the NDX gained 1.2%.

Breadth was decidedly positive, 2 to 1, on above average volume. ROC(10)’s advanced, with the DJIA and SPX crossing into positive territory, joining the NDX. RSI’s spiked higher, with the NDX leading at 69.7. The DJIA and SPX ended in the high 50’s. All three major averages had their MACD cross above signal, a key near term technical indicator. The ARMS index ended the day at 0.78, a bullish reading.

Monday was a strong session for equities, with the NDX closing at a new high of 5508 and an intraday high of 5513. It closed above its upper Bollinger Band™ of 5481 and remains the strongest of the indices near term. The DJIA and SPX broke above their 20 and 50D moving averages of: DJIA: 20D-20620, 50D-20717, SPX-20D-2353, 50D-2358. They both met resistance yesterday at their Bollinger Band tops of DJIA- 20794 and SPX-2374. The SPX closed right at that top.

Yesterday’s action took a big step in attempting to turn the near term technical bias to the upside for the DJIA and SPX. The VIX plunged 25.9% to finish at 10.84. We haven’t seen it close at this level since February.

Near term support for the NDX is at 5481 and 5475. Near term resistance is at 5500 and 5525. Near term support for the SPX is at 2362, 2358, and 2353. Near term resistance is at 2375 and 2388.

Europe is higher in early trade, and US Futures are pointing higher as well. We have a plethora of major economic reports on tap today, including the Case-Shiller Index and FHFA Housing Price Index at 9:00am, New Home Sales at 10:00am, and Consumer Confidence also at 10:00am.

The SPDR Dow Jones Industrial Average ETF (NYSE:DIA) rose $1.04 (+0.5%) in premarket trading Tuesday. Year-to-date, DIA has gained 5.00%, versus a 6.10% 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 #4 of 75 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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