Is A Bearish Reversal Brewing For The Dow Jones Industrial Average?

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October 13, 2017 8:15am INDEXDJX:.DJI NYSE:DIA

Market technician Dave Chojnacki of Street One Financial wraps up the trading week with a recap of Thursday’s anemic market action, and updates the important technical levels to focus on as stocks take a bit of a breather from their recent gains.

Despite decent economic numbers in the morning on Thursday, the market opened to the downside. Equities quickly reversed and moved to the upside, but in a choppy fashion. The major indices went in and out of positive territory several times.

All three major indices made new intra-day highs at one point, but could not hold those gains into the close. By the time the final bell rang, the averages found themselves in the red. The losses were small, but the volume and action continued to depict loss of momentum.

At the close, the Dow Jones Industrial Average (DJIA) fell 31.8 points, the S&P 500 (SPX) slipped 4.3 points, and the Nasdaq 100 (NDX) gave up 11.2 points. Breadth was just slightly positive, on below average volume.

ROC(10)’s declined in the session, indicating the continued waning of momentum. All three major indices remained in positive territory. RSI’s also slipped in the session, with the DJIA the strongest at 77.7. The NDX finished at 64.4 and the SPX at 71.6. MACD’s remain above signal for all three major indices. The ARMS index ended at 1.56, a bearish reading.

All three major indices developed a ‘Doji’ candlestick in the session, which indicates indecision and may indicate reversal of direction. The DJIA hit an intraday high of 22884 in the session, but couldn’t hold those levels and closed at 22841. It closed below yesterday’s record close of 22872. The upper Bollinger Band® is now at 22951. Its 20D-SMA is now at 20D-SMA of 22525.

The NDX similarly hit a new intraday high of 6093 and closed below its record closing high of 6081. It closed at 6069. It remains above its 20D-SMA of 5988.

The SPX traded at 2555.33, just barely above its intra-day record high. It remains above its 20D-SMA of 2522. IWM lost 0.11 of a point to 149.64.

The VIX added 0.06 of a point to 9.91.

Near term support for the NDX is at 6050 and 6025. Near term resistance is at 6075 Band 6100. Near term support for the SPX is at 2550 and 2537. Near term resistance is at 2555 and 2562.

Europe is mixed in early trade Friday, and U.S. Futures are slightly higher in the premarket. Major economic reports on tap today include CPI at 8:30am, Retail Sales at 8:30am, Business Inventories at 10:00am, and Consumer Sentiment at 10:00am.

The SPDR Dow Jones Industrial Average ETF (DIA) rose $0.11 (+0.05%) in premarket trading Friday. Year-to-date, DIA has gained 17.33%, versus a 14.97% 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 #4 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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