The Dow Jones Industrial Average Is Overbought As It Hits 25K For First Time In History

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January 5, 2018 8:00am INDEXDJX:.DJI NYSE:DIA


Market technician Dave Chojnacki of Street One Financial wraps up the first trading week of 2018 with a deeper look at the early-year equities rally, which has already gotten a bit overheated.

Mixed economic reports on Thursday morning did little to stop the 2018 rally. Once again, stocks opened to the upside and continued to move higher throughout the day. It was the third day in a row for equities to finish positively. All three major averages hit new record highs yesterday.

The Dow Jones Industrial Average (DJIA) was the strongest in Thursday’s session, closing above the 25,000 level for the first time. Equities continue with healthy sector rotation — Real Estate and Utilities were the losers as no one was looking for safety.

At the close, the DJIA was up 0.61%, the S&P 500 (SPX) added 0.4%, and the Nasdaq 100 (NDX) gained 0.13%. Breadth was positive, 1.4 to 1, on above average volume. ROC(10)’s advanced across the board, with all three major indices remaining in positive territory.

RSI’s moved higher, with the DJIA the strongest at 76.9. The SPX ended at 74.8 and NDX at 69.0. The DJIA and SPX are sitting in overbought territory. The SPX had its MACD cross signal, joining the NDX. The DJIA MACD continues below signal. The ARMS index ended at 0.89, slightly bullish at the close.

The major averages continue their perfect record in 2018. All three major indices hit new record closing and intraday highs in the session. The DJIA closed at 25075, above another milestone. It traded as high as 25105 in the session. It ended just below it upper Bollinger Band® of 25117. Its 20D-SMA is now at 24651.

The NDX closed at 6584, trading as high as 6603 in the session. It spent some time above its upper Bollinger band of 6588. Its 20D-SMA is at 6438.

The SPX closed at 2723, above its upper Bollinger band of 2720. Its 20D-SMA is now at 2675. The VIX added 0.77% to finish at 9.22.

Near term support for the NDX is at 6575 and 6550. Near term resistance is at 6600 and 6625. Near term support for the SPX is at 2700 and 2675. Near term resistance is at 2725 and 2737.

Europe is higher in early trade Friday, and U.S. Futures are pointing higher in the premarket as well. Major economic reports on tap today include the Employment Report at 8:30am, International Trade at 8:30am, Factory orders at 10:00am, and ISM Non-Mfg. Index at 10:00am.

The SPDR Dow Jones Industrial Average ETF (DIA) rose $0.94 (+0.38%) in premarket trading Friday. Year-to-date, DIA has gained 1.30%, versus a 1.78% 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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