The Dow’s Pullback Brings A Bearish Technical Level Back Into Play

Market technician Dave Chojnacki of Street One Financial examines the current state of the markets amid a post-election consolidation and updates the key technical levels to focus on as the pullback continues.

Trump Top Forming?

The market opened lower once again yesterday, as equities seem to be taking a break from their election rally. PMI and Consumer Confidence numbers were lower adding fuel to the sell-off.

The major averages moved lower throughout the morning and early PM before buyers decided to step in. The last 2 hours had equities moving higher and closed only slightly lower on the day.

The DJIA was the biggest loser, as Industrials were one of the biggest losers in the session. At the close, the DJIA fell 0.54%, the SPX slipped 2 points, and the NDX gave up 0.24%. Breadth was positive, 1.7 to 1, on above average volume.

Technical Levels To Watch Out For

ROC(10)’s were mixed, with the DJIA declining and the SPX and NDX advancing. RSI’s fell, with the NDX still the strongest at 64.2. The DJIA and SPX remain in the 50’s. The DJIA and SPX MACD continue below signal. The NDX MACD remains above signal.

The ARMS index ended the day at 1.35, moderately bearish. The major indices fell for the third straight session. After a brief breakout, the DJIA and SPX are pulling back into the range they were in since early December. It is important for the DJIA to hold the 19677 level and the SPX to hold 2250. Below these levels, they begin to fall out of the range.

The DJIA remains below its 20D-SMA of 19908. The SPX closed 3 points above its 20D-SMA of 2275. Its 50D-SMA is at 2249, a point below the bottom of the range. The NDX, remains the strongest index near term. It is comfortably above its 20D-SMA of 5056.

UUP (PowerShares US Dollar) was down big again yesterday, falling to 25.73. It is now down 3.7% since closing at 26.70 in early January.

The VIX added 0.9%, to 11.99. Near term support for the NDX is at 5100, 5056. Near term resistance is at 5125 and 5150. Near term support for the SPX is at 2275 and 2250. Near term resistance is at 2288 and 2300.

The SPDR Dow Jones Industrial Average ETF (NYSE:DIA) was trading at $198.52 per share on Wednesday morning, up $0.16 (+0.08%). Year-to-date, DIA has gained 0.51%, versus a 1.75% 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 77 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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