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Technicals Suggest A Dow Pullback Could Be Brewing

Tuesday, November 15, 2016 7:57
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Technical analyst Dave Chojnacki recaps Monday’s anemic market action, and gives investors and traders a preview of what to expect as major indexes continues hover around all-time highs.

Monday Market Recap

Equities opened slightly stronger yesterday to start the day and the week. Once again, we saw a split among the major indices as the NDX was weak, as big Cap Techs were seeing major outflows. The Dow Jones Industrial Average (DJIA) was the benefit of continuing rotation into Industrial and Financial sectors. The DJIA and S&P 500 (SPX) hit their lows mid-day and recovered somewhat by the close.

The Nasdaq 100 (NDX) remained lower through the day and ended with a fairly significant loss. At the close, the DJIA was up 21 points, the SPX was nearly unchanged, off 0.25 of a point, and the NDX gave up 1%. Breadth was slightly positive, on average volume. 10-Day Rate of Changes (ROC(10)’s) were mixed, with the DJIA advancing and the SPX staying stagnant, with the two remaining in positive territory. The NDX declined and remained in negative territory.

Relative Strength Indicators (RSI’s) were also mixed, with the DJIA and SPX moving slightly higher, with the DJIA ending at 72.6. The NDX RSI was lower at 40.2. The DJIA and SPX remain with their MACD above signal, while the NDX continues below.

The ARMS index ended the day at 0.55, a fairly bullish reading. Sector rotation continued with the DJIA making new highs of 18,869 (closing) and 18,934 (intra-day). IWM (Russell 2000-ETF) also made a new all-time high closing at 129.15.

Trading Trends

The DJIA and SPX developed ‘Doji’ candlesticks in yesterday’s session, indicating a possible reversal in the next session. The NDX developed a ‘Hammer’, indicating that it may have bottomed near term.

Key support for the NDX is at the 4,647 level. It remains below its 20-Day Simple Moving Average (20D-SMA) of 4,795. The SPX was little changed, but remained above the 2,162 support level and above its 20 and 50D-SMA’s. Key support is at the 2,147 level. The VIX added 2.1% to 14.48 yesterday, indicating that volatility may yet have some life left in it.

Near term support for the NDX is at 4,685 and 4,675. Near term resistance is at 4,725 and 4,750. Near term support for the SPX is at 2,162 and 2,147. Near term resistance is at 2,177 and 2,190.

Europe is mixed in early trade, while U.S. markets are pointing slightly higher. We have a handful of economic data reports to digest today, including Retail Sales (8:30am), Export/Imports (8:30am), Empire Manufacturing (8:30am), and finally Business Inventories (10:00am).

The SPDR Dow Jones Industrial Average ETF (NYSE:DIA) was mostly flat at $188.78 per share in Tuesday morning trading. Year-to-date, the only ETF tied to the Dow has gained 8.48%.


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./div>

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