The Dow’s Near-Term Technicals Are Weak, But Support Remains

Market technician Dave Chojnacki of Street One Financial recaps Tuesday’s broad market pullback, which was perhaps predicted by Monday’s low-volume session, and updates the important technical levels for the major indexes that investors should focus on today.

After the prior session’s strong bounce, we expected some follow through in Tuesday’s action, especially at the open. This was not meant to be, as equities opened slightly lower. They did try to get into positive territory during the morning hours, and the Nasdaq 100 (NDX) actually did for a brief period.

After the European market close, prices fell rather quickly, and then moved sideways for the remainder of the session. The Dow Jones Industrial Average (DJIA) was the biggest loser, on weak Energy and Healthcare sectors. The S&P 500 (SPX) and NDX ended the day down just a few points.

At the close, the DJIA fell 0.55%, the SPX was down 6.8 points, and the NDX slipped just 7.5 points. Breadth was just slightly negative, 1.07 to 1, on average volume. ROC(10)’s declined in the session and remain in negative territory. RSI’s slipped a bit, with the NDX the strongest at 51.5. The DJIA and SPX are now in the lower to mid 40’s.

All three major averages remain with their MACD below signal. The ARMS index ended the day at 1.47, a bearish reading.

The major indices could not follow through on the prior session’s strength, as this was hinted in the poor volume in that session. The major averages stayed just below their 20D-SMA’s during the session: DJIA-20635, SPX-2351, NDX- 5398.

Near term technicals remain weak, but the major indices have held critical near term support of the following: DJIA-20412, SPX-2322, NDX-5316. The SPX joined the DJIA in seeing its 20D-SMA cross below its 50D-SMA.

The DJIA was the biggest loser in Tuesday’s session, hurt mainly by Goldman Sachs, which reported disappointing earnings and fell 4.7% in the session. The IWM (iShares Russell 2000) was nearly flat on the day, finishing at 135.32. GLD (SPDR Gold) resumed its move up, adding 0.57% to 122.82.

The VIX fell 1.6% to 14.42, in a divergence with stocks’ pullback.

Near term support for the NDX is at 5375 and 5357. Near term resistance is at 5398 and 5425. Near term support for the SPX is at 2325 and 2322. Near term resistance is at 2351 and 2354.

Europe is mixed in early trade, and U.S. Futures are pointing slightly higher in the premarket Wednesday. Today, major economic reports include Crude Inventories at 10:30am and the Fed’s Beige Book at 2:00pm.

The SPDR Dow Jones Industrial Average ETF (NYSE:DIA) fell $0.03 (-0.01%) in premarket trading Wednesday. Year-to-date, DIA has gained 3.83%, versus a 4.63% 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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