Technical analyst Dave Chojnacki recaps Friday’s holiday-shortened trading session and notes that the major stock indexes are beginning to look overbought.
Equities opened higher on Friday and then traded flat for most of the holiday shortened session. There were enough buyers to push prices higher near the close for the Dow Jones Industrial Average (DJIA) and S&P 500 (SPX) to end with new highs. The DJIA continues to be the strongest index near term, with Industrials and Financials leading the way.
All three major indices ended the session with moderate gains. At the close on Friday, the DJIA gained 0.36%, the SPX moved up 0.39%, and the NDX added 0.33%. Breadth was positive, 2 to 1, on light volume due to the half–day session. Relative Strength Indicators (RSI’s) were slightly higher with the DJIA at 76.3 and the SPX at 70.6, entering into overbought territory.
The ARMS index ended at 1.03, a neutral reading. For the week, the DJIA was up 1.5%, the SPX added 1.4%, and the NDX gaining 1.2%. The post-election rally continued last week, with the DJIA and SPX making new all-time highs.
The VIX ended Friday at 12.34, down 0.72%. For the week, the VIX lost 3.9%, indicating further post-election decay in volatility.
Long term, the rally continued with several of the major indices making new highs. Last week was the third week in a row the DJIA has made new highs. The NDX and SPX continue above long term averages: NDX-20WK-4781, 50WK-4535; SPX-20WK-2160, 50WK-2076. For the year, the NDX is up 6% and the SPX is up 8.3%.
Short term, the bias remains to the upside, with all three major indices above the 50% retracement levels. Near term we are beginning to see the DJIA and SPX becoming slightly overbought. We would expect to see some healthy consolidation for a continued upside move. Near term critical support for the SPX is at 2085 and 4647 for the NDX.
Europe is down significantly in early trade Monday, while U.S. Futures are slightly lower in pre-market. Without any significant economic or earnings reports due today, the focus will likely be on analyst moves and the ongoing OPEC talks, although we will get GDP and Employment Numbers later this week.
The SPDR Dow Jones Industrial Average ETF (NYSE:DIA) fell $0.25 (-0.13%) to $191.05 per share in premarket trading Monday. Year-to-date, the only ETF tied to the DJIA has gained 9.95%.
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.
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.