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The Dow Jones Industrial Average May Finally Be Hinting At A Larger Pullback

Technical analyst Dave Chojnacki of Street One Financial kicks off a new trading week with a review of Friday’s market movements, along with an update of the important technical levels to focus on for the major U.S. indexes in what should prove to be a very interesting next several days.

A mixed market on Friday left the major indexes little changed, but down moderately for the week. It was a week that we got decent Housing Numbers, but investors were concentrating on the new healthcare bill. When traders were given signals on Wednesday that the bill may fail, equities fell and the SPX had its biggest decline since last September.

On Friday, the bill was pulled from a vote, and the major indices initially fell before recovering in the final hour. At the close, the DJIA fell 59.8 points, the SPX slipped 1.9 points, and the NDX was added 8.8 points.

Breadth was slightly positive on Friday, on above average volume. ROC(10’s) declined in the session, with all the major indices in negative territory. RSI’s were lower on Friday, with the major averages in the 40’s to 50’s. For the week, the DJIA was down 1.5%, the SPX fell 1.4%, and the NDX slipped 0.8%. The VIX gained 14.8% for the week, ending at 12.96, but still remains historically depressed.

Long term, the upside bias continues, but we may be seeing the beginning of a pullback. The NDX made a new intra-day high during the week, but was unable to hold that level and close at a new record high.

All three major indices continue above their 20Wk moving averages: DJIA-20015, NDX-5083, SPX-2284. Short term, the bias remains to the upside with the SPX and NDX above their 50% retracement levels of 2240 and 5025, respectively.

Near term, all three major averages fell below their 20D-SMA’s, which have provided support since the November Trump rally began. If we hold below the 20D, we may see a little more weakness near term. The SPX should see strong support in a congestion area between 2240 and 2300.

Europe is lower in early trade Monday morning, while U.S. Futures are modestly lower. We won’t see any major economic reports released today, but later in the week will be busy, with the Consumer Confidence and GDP due out, among many others.

The SPDR Dow Jones Industrial Average ETF (NYSE:DIA) fell $1.07 (-0.52%) in premarket trading Monday. Year-to-date, DIA has gained 4.17%, versus a 4.62% 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 74 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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