Equities opened Monday mixed, with the Dow Jones Industrial Average (DJIA) and S&P 500 (SPX) up slightly and the Nasdaq 100 (NDX) lower. There were no major catalysts, as far as economic reports or news to impact the averages.
The major indices began to move lower after the first half hour, and the selling grew as the day wore on. We have been warning of an overbought market and waning momentum, and Monday finally brought a small pullback.
By the end of the session, the DJIA and SPX ended at their lows of the day. All three major indices closed with moderate losses. At the close, the DJIA was off 0.23%, the SPX fell 0.40%, and the NDX gave up 0.67%.
Breadth was decidedly negative, 2 to 1, on average volume. ROC(10)’s declined in the session, but they remained in positive territory. Momentum continues to slow. RSI’s moved lower, with the DJIA still leading at 82.7. The NDX ended at 56.7 and the SPX at 69.6.
The NDX MACD crossed below signal, indicating the recent weakness in Techs. The SPX and DJIA remain with their MACD above signal.
The ARMS index ended at 1.55, a bearish reading. The major indices were due for a pullback and yesterday may have been the beginning. The DJIA and SPX both developed ‘engulfing bearish’ candles in the session, and as mentioned earlier, the NDX had its MACD cross below signal. All indications of weakening near term technicals.
The DJIA closed at 23273, continuing comfortably above its 20D-SMA of 22793. The SPX closed at 2564, which is just 21 points above its 20D-SMA of 2543. The NDX was the big loser in the session, closing at 6067. Its 20D-SMA is now at 6040. The tech-heavy index has now fallen in the last 3 out of four sessions.
IWM (iShares Russell 2000) closed at 148.86, below its 20D-SMA of 149.12. The VIX spiked 11% to 11.07.
Near term support for the NDX is at 6050 and 6040. Near term resistance is at 6100 and 6122. Near term support for the SPX is at 2550 and 2543. Near term resistance is at 2564 and 2575.
Earnings reports continue in earnest this week. Europe is higher in early trade Tuesday, while U.S. Futures are moderately higher in the premarket. On the economic data front today, we’ll see the Richmond Fed announcement at 10:00am.
The SPDR Dow Jones Industrial Average ETF (DIA) rose $1.22 (+0.52%) in premarket trading Tuesday. Year-to-date, DIA has gained 19.55%, versus a 15.63% 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.