Market technician Dave Chojnacki of Street One Financial provides a technical update on the major U.S. stock market averages, as we kick off a new trading month with stock sitting firmly at overbought levels
A lower than forecast GDP number Tuesday morning set the stage for equities to open to the downside. Chicago PMI and Consumer Confidence numbers came in good, however, and the averages briefly moved into positive territory.
Talk from Fed members that hinted of a rate hike in March then put the lid on equities, and they moved lower for the remainder of the session. By the final bell, the major indices were slightly lower and broke the DJIA string of new highs.
Consumer Discretionary was the biggest losing sector in the session. At the close, the DJIA fell 25.2 points, the SPX rose 6.1 points, and the NDX gave up 0.32%. Breadth was negative, 2 to 1, on above average volume. ROC(10)’s declined, but all three averages remain in positive territory.
RSI’s fell in the session, but remain in the 70’s for all three major averages. The recent weakness in the NDX moved its MACD to cross below signal. The DJIA and SPX remain with their MACD above signal. The ARMS index ended the day at 1.36, a slightly bearish level.
It was an interesting session, in that we saw the string of record highs for the DJIA broken. There were also some other cautionary near term signals, such as, the NDX MACD crossing below signal, a pick-up in volume on a down day and breadth decidedly negative. With the recent overbought levels continuing, a brief pullback near term would not be a surprise.
The SPX and NDX continue comfortably above their 20D-SMA’s of 2327 and 5254, respectively. Our near term targets are SPX-2382 and NDX-5362. IWM (small-caps) was one of the big losers in the session, falling 1.5% to 137.84.
Meanwhile, the VIX moved up for the second straight day to finish up 6.8% to 12.92. It ended above the key 12.50 level, which has acted as a base for some time.
Near term support for the NDX is at 5325 and 5300. Near term resistance is at 5350 and 5362. Near term support for the SPX is at 2362, 2350 and 2337. Near term resistance is at 2375, and 2382.
Europe is significantly higher in early trade, and U.S. Futures are sharply higher as well. Today, we’ll see another slew of key economic reports, including Personal Income/Spending at 8:30am, Construction Spending and ISM Index both at 10:00am, Crude Inventories at 10:30am, and the Fed Beige Book at 2:00pm.
The SPDR Dow Jones Industrial Average ETF (NYSE:DIA) rose $1.28 (+0.62%) in premarket trading Wednesday. Year-to-date, DIA has gained 5.30%, versus a 5.79% 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.