Volatility Begins To Strike The Dow Jones Industrial Average Amid Global Tensions

Market technician Dave Chojnacki of Street One Financial recaps Tuesday’s volatile market action, which saw the Dow Jones Industrial Average (DJIA) fall below its 50-day moving average, and updates the important technical levels to focus on as we progress through the short trading week.

Then markets opened lower yesterday and proceeded to fall through some key technical levels, such as the 50D moving averages, early in the session. Stocks did catch a bid just before the Euro close, however, and slowly recovered through the PM hours.

Geopolitical issues continue to weigh on investors minds, and this is being reflected in the Volatility Index, rising in the last three sessions. By the final bell, the DJIA and S&P 500 (SPX) ended with little change to the downside. The NDX closed with a small to moderate loss.

At the close, the DJIA fell 6.7 points, the SPX slipped 3.3 points, and the Nasdaq 100 (NDX) gave up 0.4%. Breadth was positive, 1.6 to 1, on slightly above average volume. ROC(10)’s declined, with all three major indices falling into negative territory. RSI’s fell to the downside with the NDX taking the biggest hit to 53. The DJIA and SPX are now in the upper 40’s.

All three major averages remain with their MACD below signal. The ARMS index ended the day at 1.26, a slightly bearish reading.

The early losses on Tuesday were being signaled by the rising VIX over the last two sessions. The DJIA and SPX also fell below their 20D-SMA’s last week of 20710 and 2359, respectively. In yesterday’s session they both traded below their 50D-SMA’s for the first time in several weeks (DJIA-50D-20629, SPX-50D-2349). They did find support near their lower Bollinger Band (DJIA- 20483, SPX-2335) and then nearly recovered all their losses before the final bell. We will know today if we made a temporary low on Tuesday.

Meanwhile, the NDX, which had been the strongest of the three indexes heading into this week, closed below its 20D-SMA (5405) for the first time since the middle of March.

The VIX ended at 15.07, up 7.2%. The GLD (SPDR Gold) made a major move above its 200D-SMA, closing up 1.4% to 121.19. IWM (small cap index) was up 0.8% to 136.90, bucking the large cap pullback.

Near term support for the NDX is at 5375 and 5350. Near term resistance is at 5405 and 5425. Near term support for the SPX is at 2349 and 2335. Near term resistance is at 2359 and 2375.

Europe is higher, while U.S. Futures are mixed in the premarket Wednesday. Major economic repots on tap today include Import/Export Prices at 8:30am, Crude Inventories at 10:30am, and the Treasury Budget at 2:00pm.

The SPDR Dow Jones Industrial Average ETF (NYSE:DIA) was unchanged in premarket trading Wednesday. Year-to-date, DIA has gained 4.47%, versus a 5.16% 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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