Market technician Dave Chojnacki of Street One Financial examines the conclusion of the Nasdaq 100’s big winning streak, and updates the technical levels investors should focus on in the final trading day of the week.
Equities Dump, Then Partially Recover
Initial Claims were slightly better than expected yesterday, but this did little to energize equities as they moved lower at the open. The major averages continued to move lower through the AM hours, before they finally caught a bid after the European close.
Stocks made a recovery through the entire PM session, but were unable to get back into positive territory, as the morning losses were just too huge. This time the major indices moved in sync, and the 7 day run-up of the Nasdaq 100 (NDX) came to an end. All 3 major indices closed with small losses. At the close, the Dow (DJIA) fell 0.32%, the S&P 500 (SPX) gave up 0.21%, and the NDX lost 0.17%. Breadth was negative, 1.5 to 1, on below average volume.
Despite Pullback, Technicals Still Bullish
ROC(10)’s were mixed in yesterday’s action, with the DJIA moving lower and the NDX and SPX advancing. All three remain in positive territory. RSI’s were lower in the session, but remain near or above the 60 level. MACD’s remain below signal for the DJIA and SPX and above signal for the NDX.
The ARMS index ended the day at 1.13, a slightly bearish reading. The major indices took a breather yesterday, however, they remain within the ‘Bull handle’ range and within striking distance of their recent highs. Technical strength remains strong near term and long term.
The DJIA remained above its 20D-SMA of 19888, but just barely. The NDX continues to be the strongest index near term with an RSI of 65.8 and comfortably above its 20D-SMA of 4956. It closed just 9 points below the prior day’s new high of 5050. The SPX closed within 6 points of the recent 2276 high. It remains above its 20D-SMA of 2263. The GLD (SPDR Gold) closed at 113.91, above its 50D-SMA yesterday. We expect it to meet resistance near the 115.00 level.
The VIX added 2.5% to finish at 11.54. Near term support for the NDX is at 5025 and 5007. Near term resistance is at 5050 and 5075. Near term support for the SPX is at 2263 and 2250. Near term resistance is at 2271 and 2276.
Europe is moderately higher in early trade, while U.S. Futures are pointing slightly higher in the premarket. The markets will be closed on Monday for MLK Day, so a number of reports have been either moved up to today or pushed back to later next week.
Hence today will be a busy day on the economic data and earnings front. We’ll see the PPI numbers and Retail Sales data at 8:30am, and Business Inventories and Michigan Sentiment data at 10:00am. We also saw a slew of earnings reports early this morning from a number of high-profile financial stocks, so expect those to potentially move the markets as well.
The PowerShares QQQ Trust ETF (NASDAQ:QQQ) rose $0.10 (+0.08%) in premarket trading Friday. Year-to-date, QQQ has gained 3.63%, versus a 1.38% rise in the benchmark S&P 500 index during the same period.
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.