Equities opened lower again yesterday, as the Trade Balance continues to widen. The major indices traded in a narrow and choppy range through most of the day, as they failed on several attempts to get into positive territory. The averages continued to gyrate in the last hour, falling to their lows of the day. They then bounced off their lows to finish only slightly lower on the day.
Pharma’s were leading the way to the downside, as President Trump reiterated his pledge to bring drug prices down. IBB (iShares Biotechnology ETF), for example, fell 1.6% in the session.
At the close, the DJIA was down 29.5 points, the SPX fell 6.9 points, and the NDX gave up 9 points. Breadth was decidedly negative, 2 to 1, on weak volume for the second straight session. ROC(10)’s declined, but remain in positive territory for all three major indices. RSI’s were slightly lower and remain between 63 and 70 for the three major indices. The DJIA continues to be the strongest at 70. The SPX joined the NDX with its MACD falling below signal. This is a key near term negative signal.
The ARMS index ended the day at 1.46, a bearish level. We saw continued weakness in equities yesterday, but once again the volume was extremely low. The SPX traded down to close a gap at 2367 and closed just a point above at 2368. A drop below that level, and we expect it would test its 20D-SMA at 2351.
Since the rally began in early November, the 20D-SMA has provided support for the major indices. The NDX closed at 5351, comfortably above its 20D-SMA of 5308. The DJIA is also comfortably above its 20D-SMA of 20658. GLD (SPDR Gold) continued its decline to 115.78, and may find support at the 115.00 level.
The VIX added 1.8% to 11.45 in Tuesday’s session, but volatility remains historically muted.
Near term support for the NDX is at 5350 and 5325. Near term resistance is at 5362 and 5375. Near term support for the SPX is at 2362 and 2351. Near term resistance is at 2375 and 2388.
Europe is lower in early trade, and U.S. Futures are pointing slightly lower in the pre-market. We have a slew of major economic reports on tap today, including ADP Employment Changes at 8:15am Prod./Unit Labor Cost at 8:30am, Wholesale Inventories at 10:00am, and Crude Inventories at 10:30am.
The SPDR Dow Jones Industrial Average ETF (NYSE:DIA) fell $0.15 (-0.07%) in premarket trading Wednesday. Year-to-date, DIA has gained 5.90%, versus a 6.03% rise in the benchmark S&P 500 index during the same period.
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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.
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