Struggling Small Caps Could Rub Off On The Dow Jones Industrial Average

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December 7, 2017 8:12am INDEXDJX:.DJI NYSE:DIA

stock market

Technical analyst Dave Chojnacki of Street One Financial recaps Wednesday’s anemic market action and looks ahead to Thursday’s session with an update of the important technical levels to watch for the major U.S. indexes.

The Dow Jones Industrial Average (DJIA) and S&P 500 (SPX) opened lower on Wednesday on worse than estimated Productivity numbers. Techs were higher for the second day in a row as they attempt to recover some of their recent losses.

The trading was rather dull during the session, with the major averages trading in a narrow range, especially the SPX. The SPX traded in just a 10 point range during the session. By the end of the day, the DJIA and SPX were just slightly lower and the Nasdaq 100 (NDX) finished with moderate gains.

At the close, the DJIA was off 39.7 points, the SPX slipped just 0.3 of a point, and the NDX was up 0.45%. Breadth was negative, 1.4 to 1, on below average volume. ROC(10)’s were mixed in the session, with the DJIA and SPX declining , but remaining in positive territory. The NDX advanced, but remained in negative territory.

RSI’s were mixed, with the DJIA and SPX slipping slightly. They remain in the mid to upper 60’s. The NDX rose to 50.6, continuing to remain the lowest. The DJIA and SPX remain with their MACD above signal, while the NDX remains below. The ARMS index ended at 1.38, a fairly bearish reading.

The NDX finished with a moderate gain, as the big Tech names lead the way for the second day in a row. The NDX closed at 6293, holding just below its 20D-SMA of 6331. It traded as low as 6234, right at its lower Bollinger Band®. We may get some indication if the tax selling and rotation out of Techs is over in today’s trading.

The DJIA closed at 24140, holding above its 20D-SMA of 23698. Some of the DJIA’s overbought level has come off in the last two sessions. The SPX was little changed, closing at 2629. It remains above its 20D-SMA of 2603. IWM (Russell 2000) has been down 4 days straight, so it’ll be interesting to see if that trend rubs off on its large cap counterparts. Meanwhile, the VIX finished down 2.7% to 11.02.

Near term support for the NDX is at 6250 and 6235. Near term resistance is at 6300 and 6331. Near term support for the SPX is at 2625 and 2612. Near term resistance is at 2647, 2650 and 2665.

Europe is slightly higher in early trade Thursday, while U.S. Futures are mixed in the premarket. Major economic reports on tap for today include Jobless Claims at 8:30am and the EIA Natural Gas Report at 10:30am.

The SPDR Dow Jones Industrial Average ETF (DIA) fell $0.24 (-0.10%) in premarket trading Thursday. Year-to-date, DIA has gained 24.16%, versus a 18.85% 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 #3 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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