Is A Major Pullback Looming For The Dow Jones Industrial Average?

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November 15, 2017 8:21am INDEXDJX:.DJI NYSE:DIA


Technical analyst Dave Chojnacki of Street One Financial examines Tuesday’s low-volume pullback and updates the important technical levels to focus on as investors wait with bated breath for Washington’s tax plan details.

Despite decent PPI numbers, equities moved lower in the early goings on Tuesday. The Dow Jones Industrial Average (DJIA) and S&P 500 (SPX) tested and moved through their 20D-SMA’s. The major indices did catch a bid mid-morning and they came off their lows. Most of the remaining session was flat.

By the end of the day, the major averages finished with small losses. Investors continue to wait for Tax Plan details out of Washington’s finest. Near the end of the day on Tuesday, word came from the Senate that they may include the repeal of the ACA mandate in the bill. This, in turn, could allow bigger cuts to taxes.

At the close on Tuesday, the DJIA was down 30.2 points, the SPX fell 5.9 points, and the NDX gave up 0.36%. Breadth was negative, 1.6 to 1, on average volume. ROC(10)’s declined, with all three major averages remaining in positive territory.

RSI’s fell in the session, with the NDX continuing to be the strongest at 65.8. The DJIA ended at 62.8 and the SPX at 58.2. The DJIA and SPX remain with their MACD below signal. The NDX is the only major index with its MACD above signal. The ARMS index ended the day at 1.43, a fairly bearish reading.

There was more indecision in equities yesterday. The DJIA and SPX tested their 20D-SMA support, fell below it, then managed to close just barely above. The DJIA closed at 23409, while its 20D-SMA is at 23407. The next key level of support is at 23000, where it closes a ‘gap’.

The SPX closed at 2578, just above its 20D-SMA of 2576. The next critical support below is at 2544. Its 50D-SMA is now at 2540. The NDX ended at 6293, comfortably above its 20D-SMA of 6211. The NDX continues to remain the strongest of the big indices, despite losses in 3 out of the last 4 sessions. We find it’s prudent to exercise caution in the near term.

The VIX added 0.78% to finish at 11.59.

Near term support for the NDX is at 6250 and 6211. Near term resistance is at 6300 and 6345. Near term support for the SPX is at 2576 and 2562. Near term resistance is at 2597 and 2600.

Europe is lower in early trade Wednesday, and U.S. Futures are pointing significantly lower in the premarket. We’ll see a number of major economic reports today, including Consumer Price Index at 8:30am, Retail Sales at 8:30am, Empire State at 8:30am, Business Inventories at 10:00am, and the EIA Oil Report at 10:30am.

The SPDR Dow Jones Industrial Average ETF (DIA) fell $0.94 (-0.4%) in premarket trading Wednesday. Year-to-date, DIA has gained 20.39%, versus a 16.37% 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 80 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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