Weak Volume In Dow Jones Industrial Average Lessens Impact Of Latest Rally

Technical analyst Dave Chojnacki of Street One Financial examines Monday’s big equity rally, finding weak volume and thus little reason for conviction in the buying, and updates the important technical levels to focus on as earnings season kicks into gear.

Investors ignored weak economic numbers and geopolitical events, and bought up stocks yesterday. After three consecutive sessions to the downside, equities opened to the upside Monday and moved steadily higher throughout the session.

Buying in the last hour left the major indices with significant gains on the day. Financials were the strongest sector, and lead the Dow Jones Industrial Average (DJIA) to post the best numbers.

All three major averages had a good day. At the close, the DJIA gained 0.9%, the S&P 500 (SPX) added 0.85%, and the Nasdaq 100 (NDX) was up 0.85%. Breadth was decidedly positive, 3 to 1, on weak volume. ROC(10)’s advanced in the session, but remain in negative territory. RSI’s moved higher in the session, with the NDX continuing to lead with a reading of 53.1. 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 0.66, a fairly strong bullish reading.

The major indices had a very good session, recovering from last week’s losses. The averages ended at their highs of the day, and the strong last hour indicates we may see a follow through in today’s session. The weak volume in the session, however, lends little conviction to the strong price movement.

All three major averages remain below their 20D-SMA’s: DJIA-20654, SPX-2353, NDX-5400. Near term weakness remains, as MACD’s remain below signal. The DJIA 20D-SMA crossed below its 50D-SMA (20670), indicating a further weakening of technicals near term.

The IWM (iShares Russell 2000) also had a strong day, adding 1.1% to 135.29. GLD (SPDR Gold) took a breather and fell 0.29% to 122.24. The VIX also fell 8.1% to 14.66.

Critical near term support levels are: DJIA-20412, SPX-2322, NDX-5316. 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 2337 and 2322. Near term resistance is at 2350 and 2353.

Europe is lower in early trade, and U.S. Futures are pointing lower in the premarket Tuesday.

The SPDR Dow Jones Industrial Average ETF (NYSE:DIA) fell $0.22 (-0.11%) in premarket trading Tuesday. Year-to-date, DIA has gained 4.38%, versus a 4.94% 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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