Equities opened significantly to the downside on Wednesday. There was no major news which set the stage, but as we had noted prices were becoming extended near term. We would expect a healthy pullback, which would set the base for a further rally.
Investors didn’t wait too long to eventually go back in and begin buying stocks, however. Techs were one of the weaker sectors, but the losses were widespread. The end of the day buying kept the losses small as the major indices ended with some strength.
The Dow Jones Industrial Average (DJIA) fell 16.6 points, the S&P 500 (SPX) inched down 3 points, and the Nasdaq 100 (NDX) gave up 15 points. Breadth was negative, 1.5 to 1, on average volume. ROC(10)’s were mixed with the DJIA declining, the NDX advancing, and the SPX with no change. All three major indices remain in positive territory.
RSI’s moved lower, but remain in overbought territory. The DJIA continues as the strongest at 80.4. The SPX ended at 77.6 and the NDX at 72. All three MACD’s continue above signal. The ARMS index ended at 0.57, a fairly bullish reading. It indicated the strength at the end of the session. Wednesday was the first loss of the year for the major indices. There was decent shake-out early, but the late day surge left equities still somewhat extended near term.
The DJIA closed at 25369, comfortably above its 20D-SMA of 24864. It is now below its upper Bollinger Band® of 25396. The NDX closed at 6662, just a point below its high of the day. Its 20D-SMA now sits at 6504. The SPX closed at 2748, just below its high of the day at 2750. Its 20D-SMA is now at 2696. The VIX ended the day lower at 9.82, down 2.5%.
Near term support for the NDX is at 6650 and 6600. Near term resistance is at 6700 and 6750. Near term support for the SPX is at 2737 and 2725. Near term resistance is at 2750 and 2762.
Europe is lower in early trade Thursday, but U.S. Futures are pointing higher in the premarket. Major economic reports on tap today include Import/Export Prices at 8:30am, Wholesale Trade at 10:00am, and the EIA Report at 10:30am.
The SPDR Dow Jones Industrial Average ETF (DIA) rose $0.38 (+0.15%) in premarket trading Thursday. Year-to-date, DIA has gained 2.52%, versus a 2.72% 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.
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Prior to joining Street One, Dave designed and developed I/T Systems for the Insurance and Financial Industries.