Market technician Dave Chojnacki of Street One Financial examines the state of the major U.S. indexes and finds very overbought conditions at current levels.
The market got off to a strong start Tuesday and never looked back. There was little economic news to move the averages, as pundits claimed it was a continuation of the Trump rally.
There was a brief pullback just before noon, but equities resumed their march higher in the PM and continued into the final bell. All three major indices ended the day moderately higher and set new record highs.
Volume picked up slightly in the session, something that had been missing last week. At the close, the DJIA added 0.58%, the SPX gained 0.6%, and the NDX moved up 0.49%. Breadth was decidedly positive, 2.3 to 1, on slightly above average volume. ROC(10)’s advanced in the session and remain in positive territory.
RSI’s moved higher, as the major averages are becoming extremely overbought near term. The major indices all have RSI’s in the 80’s, with the NDX the leader at 84.1. All three major indices continue with their MACD above signal. The ARMS index ended the day at 0.70, a bullish level.
Near term, the major averages are becoming overextended, as indicated by their RSI’s and Bollinger Bands. The DJIA closed at 20743, just 8 points below its Bollinger band top of 20751. The NDX and SPX closed a few points outside their Bollinger Band tops of 5347 and 2362, respectively.
Yesterday’s rally was broad, as indicated by the breadth, and a new high for the IWM (small-caps) at 140.20. The SPX has been up 9 of the last 10 sessions and continues with the upside bias.
Our near term targets for the SPX and NDX are 2382 and 5362, respectively. The DJT (Transports) was up 0.38%, but fell short of establishing a new high. The VIX added 0.7% to finish at 11.57.
Near term support for the NDX is at 5347, 5325 and 5300. Near term resistance is at 5350 and 5375. Near term support for the SPX is at 2362, 2350 and 2337. Near term resistance is at 2375 and 2382.
Europe is mixed in early trade today, while U.S. Futures are pointing slightly lower in the premarket. In terms of economic reports on tap today, we’ll see Existing Home Sales at 10:00am and FOMC Minutes at 2:00pm.
The SPDR Dow Jones Industrial Average ETF (NYSE:DIA) was unchanged in premarket trading Wednesday. Year-to-date, DIA has gained 4.84%, versus a 5.80% 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.