The market gapped lower on Friday on no major economic news, but most likely it was just a pause in the recent rally. Equities quickly found support and slowly reversed through the morning hours. Right before the close, equities spiked higher on Friday to close positive and at their highs of the day.
The last hour move propelled the DJIA to its 11th straight record high and the SPX to a new closing high. In the shortened week, equities barely moved in the last three days. At the close, the DJIA was up 11.4 points, the SPX inched up 3.5 points, and the NDX gained 10.9 points.
Breadth was slightly higher on Friday, on below average volume. ROC(10’s) were lower, but continued in positive territory. RSI’s remain firmly in overbought territory, while the ARMS Index ended at a fairly bearish 1.80.
For the week, the DJIA was up 0.9%, the SPX gained 0.6%, and the NDX added 0.3%. The VIX was off 2% and was little changed for the week.
Long term, the upside bias continues with more new highs in the major indices last week. The major averages are all comfortably above their 200D-SMA’s. The DJIA is 11.1% above its 200D, the SPX is 8.6%, and the NDX 11.6%. They are also comfortably above their 20WK moving averages of: DJIA-19461, SPX-2235, and NDX-4963.
Short term, the bias remains to the upside with the SPX and NDX above their 50% retracement levels of 2192 and 4914, respectively. Near term, by several measures, the major averages are overbought, but it is important to remember that equities can trade at overbought levels for quite some time.
Critical near term support for the SPX is 2250, and 5172 for the NDX. Near term targets are NDX-5362, SPX- 2382.
Europe is mixed in early trade and U.S. Futures are pointing lower Monday morning. A plethora of reports are due out this week, including GDP, Durables, PMI, ISM, Consumer Confidence, and more. Today, we’ll get Durable Goods Orders at 8:30am and Pending Home Sales and 10:00am.
The SPDR Dow Jones Industrial Average ETF (NYSE:DIA) fell $0.05 (-0.02%) in premarket trading Monday. Year-to-date, DIA has gained 5.28%, versus a 5.91% 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.
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.