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The Dow Jones Industrial Average Enters Overbought Territory

Market technician Dave Chojnacki of Street One Financial examines Tuesday’s Fed-fueled market rally and updates the major technical levels that investors and traders should focus on as the markets once again put in new all-time highs.

After opening flat or slightly lower yesterday, equities finally found some Valentine’s Day love, and rocketed higher in the afternoon. Yellen’s congressional testimony, hinting of 3 rate hikes in 2017, did not spook the market one bit.

The major averages maintained their strength into the close and ended with moderate gains. For the second straight session, the major indices closed at record highs. The Russell 2000 also followed for the second straight session, closing at a new high. This depicts the widespread strength we are seeing in equities.

At the close, the DJIA gained 0.45%, the SPX added 0.4%, and the NDX moved up 0.27%. Breadth was just slightly positive, on below average volume. ROC(10)’s advanced in the session, with all three major indices remaining in positive territory.

RSI’s moved higher, with the NDX at the strongest at 79.6. The DJIA and SPX continue in overbought territory at 74.7 and 75.3, respectively. All three major indices continue with their MACD above signal. The ARMS index ended the day at 0.60, a bullish reading.

The strength at the end of the day had the major indices ending at their highs of the session. Breadth was only slightly positive in the session, but equities continued their march higher. The DJT (Dow Transports) did not participate in yesterday’s rally and ended slightly lower. Financials were the leading sector. The IWM (Russell 2000) ETF closed at a new high of 138.76.

All three major indices remain comfortably above their 20D-SMA’s, which has been providing support over the last few months. 2348 remains as a near term target for the SPX. The VIX was slightly lower in the session, ending at 10.74, down 3%.

Near term support for the NDX is at 5250 and 5234. Near term resistance is at 5275 and 5288. Near term support for the SPX is at 2325 and 2312. Near term resistance is at 2337 and 2348-50.

Europe is slightly higher in early trade this morning, while U.S. Futures are pointing slightly higher in the premarket. We’ll see a slew of major economic reports hitting the wires today, including CPI, Empire Manufacturing, and Retail Sales all at 8:30am, Capacity Utilization/Industrial Production numbers at 9:15am, NAHB Housing data at 10:00am, and Crude Inventories at 10:30am.

The SPDR Dow Jones Industrial Average ETF (NYSE:DIA) rose $0.43 (+0.21%) in premarket trading Wednesday. Year-to-date, DIA has gained 3.88%, versus a 4.55% 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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