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What To Make Of Yesterday’s Big Market Reversal?

Thursday, December 1, 2016 7:41
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Technical analyst Dave Chojnacki recaps Wednesday’s market action, which saw a big intraday reversal off of new highs, and updates the key technical levels that investors and traders should focus on following yesterday’s big oil rally.

Wednesday’s Big Reversal

Good economic numbers seemed to propel the major indices at the open yesterday. The Dow Jones Industrial Average (DJIA) and S&P 500 (SPX) even made new intraday highs early on, before reversing direction and moving to the downside.

Equities moved consistently lower through the day, despite energy issues moving higher on what seems to be a major OPEC agreement. The indices ended at their lows of the day with a sell-off at the closing bell.

The major indices ended mixed, with the DJIA inching out a small gain, the SPX a small loss and the Nasdaq 100 (NDX) falling significantly.  At the close, the DJIA added 1.98 points, the SPX gave up 5.8 points, and the NDX lost 1.28%.

Technicals Getting Bearish?

Breadth was negative, 1.5 to 1, on above average volume.  10-Day Rates of Change (ROC(10)’s) declined in the session, with all three major indices remaining in positive territory.  Relative Strength Indicators (RSI’s) were mixed, with the DJIA still at an overbought level of 73.1.  All three major indices continue with their MACD above signal, while the ARMS index ended the day at 0.62, a bullish indicator. This diverged from the actual last few minutes sell-off.

It was an interesting day as we saw more consolidation as the market digested recent gains.  The NDX was the biggest loser, with Techs being weak.  Perhaps the biggest example of this weakness was a 2% sell-off in Facebook (FB).

All three major indices developed  candlesticks, which indicate a near term bearish signal.  However, prices remain above near-term critical support levels.  The NDX dropped below its 50-day simple moving average (50D-SMA) of 4825, but holds above its 20D-SMA of 4793.  Near term critical support is at 4766.

IWM (Russell 2000) was off 0.5%, and actually down for the third straight session. The SPX, despite moving to a new intra-day high, closed below the 2200 level.  Critical near term support for the SPX is at 2147-2149.

The VIX gained 3.8% to finish at 13.39.  Near term support for the NDX is at 4800 and 4793. Near term resistance is at 4825 and 4850. Near term support for the SPX is at 2190, 2188 and 2175.  Near term resistance is at 2212, 2213 and 2225.

Lots of Data Ahead

Europe is down significantly in early trade this morning, while U.S. Futures are mixed in the pre-market.

We’ll once again see a number of important economic data releases today, including:

  • Initial/Continuing Claims – 8:30am
  • Construction Spending – 10:00am
  • ISM Index – 10:00am
  • NatGas Inventories – 10:30am
  • Auto Sales – 11:00am

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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