Dow Jones Industrial Average Due For A Pullback Amid Overbought Technicals

February 21, 2017 8:21am INDEXDJX:.DJI NYSE:DIA

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Market technician Dave Chojnacki of Street One Financial kicks off the shortened trading week with a look back at how the major averages are faring as of late, and updates the important technical levels for investors to consider.


The market opened lower on Friday, with little news to move the averages. Leading Indicators were slightly better than expected, and pulled the indices off their lows.

Prices moved higher through the PM hours and ended at their highs of the day. The NDX was the big winner on strength in the Biotech sector. All three major indices closed to the upside, establishing new record closing highs.

Despite being an options expiration day, volume was weak. At the close, the DJIA added 4.2 points, the SPX inched up 3.9 points, and the NDX moving up 0.45%. Breadth was slightly negative, 1.1 to 1, on below average volume. ROC(10’s) were mixed and continued in positive territory.

The ARMS Index ended at 0.91, slightly bullish at the close. For the week, the DJIA was up 1.7%, the SPX gained 1.5%, and the NDX added 1.8%. The VIX was down 2.3% on Friday, to finish at 11.37. It was up 4.7% for the week. Volatility remains extremely low.

Long term, the upside bias continues as the major averages move to new record highs again last week. Volume continues to be low and the major indices are at overbought levels.

We also see the major averages bumping up against the top of their Bollinger Bands, suggesting they may be somewhat over-extended. Bollinger Bands top: DJIA-20670, NDX-5328, SPX-2354. Short term, the bias continues to the upside, with the 50% retracement at: NDX-4914, SPX- 2192.

Near term, we see the indices over-extended and we would expect consolidation or a pullback. Critical near term support for the SPX is 2233 and 5086 for the NDX. Near term targets are NDX-5362, SPX- 2382.

Europe is moderately higher in early trade, and U.S. Futures pointing higher. We get Housing data and FOMC minutes later this week, but without any major economic reports due out today, earnings from major firms like Walmart and Home Depot will take center stage.

The SPDR Dow Jones Industrial Average ETF (NYSE:DIA) rose $0.62 (+0.3%) in premarket trading Tuesday. Year-to-date, DIA has gained 4.24%, versus a 5.17% rise in the benchmark S&P 500 index during the same period.

DIA currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #6 of 75 ETFs in the Large Cap Value ETFs category.


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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