Market technician Dave Chojnacki of StreetOne Technical Analysis wraps up an eventful trading week with a deep dive into the underlying technicals for the major U.S. averages.
After Wednesday’s big loss, Futures were considerably lower before the open on Thursday. The CPI number, came in lower than expected and the Unemployment Claims number came in higher than expected. Futures improved after the reports, as traders saw it as a cooling of economy and lessening pressure on rates. The SPX and Dow opened lower, but we saw a positive open in the NDX. Investors saw some bargains in the beat up Techs. This did not last through the session as the major averages broke through some key support levels and the selling accelerated in the PM hours. Rates, which have been blamed for the recent sell-off, were lower with the 10YR coming down to 3.13. All three major indices ended the day with significant losses. It was the 6th straight loss for the SPX.
At the close on Thursday, the Dow fell 2.1%, the SPX was down 2%, and the NDX slid 1.1%. Breadth was decidedly negative, 4 to 1, on heavy volume. ROC(10)’s declined for all three major indices and they remained in negative territory. RSI’s continued lower and all three major indices are now in over-sold territory. The Dow finished at 26.4, the SPX at 17.6, and the NDX at 21.9. All three major indices remain with their MACD below signal. The ARMS index ended the day at 1.43, a bearish indication.
We have now seen a significant pullback in the last few days. A break of the 200D-SMA for all three major indices accelerated the selling in the session. Volume also spiked, which may be indicating some exhaustion to the selling. The NDX closed at 6964, falling through its 200D-SMA of 7037. There is additional support at 6950 and at its 50WK-SMA of 6908. A break through these levels and there is room to fall to 6750. The Dow ended the day at 25052, falling through its 200D-SMA of 25140. There is support at the 25000 level, but a break through takes us down to 24000. The SPX closed at 2728, breaking its 200D-SMA(2765) and it 50WK-SMA(2739). Its 61% Fibonacci retracement is at 2714. It has additional support at 2700. A break below 2700 and there is room to run down to 2600.
The volume spike and ovesold RSI suggest we are near bottom. The VIX spiked 8.8% to 24.98.
Near term support for the NDX is at 6950 and 6908. Near term resistance is at 7037 and 7200. Near term support for the SPX is at 2700 and 2688. Near term resistance is at 2765 and 2800.
Europe is higher in early trade Friday, while US Futures are significantly higher premarket. The only major economic report due out today is the Import Price Index at 8:30am.
The SPDR Dow Jones Industrial Average (NYSE:DIA) ETF (DIA) rose $3.73 (+1.49%) in premarket trading Friday. Year-to-date, DIA has gained 3.56%, versus a 4.00% 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 #4 of 82 ETFs in the Large Cap Value ETFs category.