Fed Notes Ruin Dow Jones Industrial Average Rally

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February 22, 2018 7:55am INDEXDJX:.DJI NYSE:DIA

Market technician Dave Chojnacki of Street One Financial examines Wednesday’s see-saw market action, which was hurt by some hawkish commentary from the Federal Reserve, and updates the key technical indicators for the major U.S. averages.

Equities opened higher on Wednesday, and proceeded to move higher through the morning hours. Existing Housing Sales came in weaker than expected, but had little impact on a soaring rally. The rally was stopped dead in its tracks, however, when the FOMC minutes were issued at 2pm.

The FOMC indicated that they would proceed with rate hikes as necessary, immediately spooking traders. The major indices made a major reversal going from big gains to significant losses at the final bell.

At the close, the Dow Jones Industrial Average (DJIA) fell 0.67%, the S&P 500 (SPX) was down 0.55%, and the Nasdaq 100 (NDX) gave up 0.3%. Breadth was slightly negative, 1.2 to 1, on below average volume. ROC(10)’s fell in the session, with the DJIA moving back into negative territory. The NDX and SPX held in positive territory.

RSI’s moved lower with the DJIA at 44.9 and the SPX falling to 46.8. The NDX dropped to 53.5. The NDX MACD remains above signal, while the DJIA and SPX continue below. The ARMS index ended the day at 2.15, an extremely bearish reading.

The major averages reacted to interest rates again, which has been the drag on the market since the recent pullback. Volume was still below average, which has been the case for the last 6 sessions. The DJIA closed at 24797, remaining below its 50D-SMA of 25199. It remains below the 50% retrace level of 25238.

The SPX closed at 2701, which was its low of the day. The SPX remained below its 50D-SMA of 2728. It continued below its 50% retrace level of 2726. We continue to see more near term weakness as we remain below these levels. The NDX finished the day at 6759. The NDX has been the strongest index, holding above its 20 and 50D moving averages of 6735 and 6641, respectively.

The TLT (iShares 20+ Year Treasury ETF) continues lower, testing a 1-year low of 116.51. It closed at 116.74. Despite the market pullback, the VIX still fell 2.8% to finish at 20.02.

Near term support for the NDX is at 6735 and 6700. Near term resistance is at 6800 and 6850. Near term support for the SPX is at 2692 and 2675. Near term resistance is at 2728 and 2737.

Europe is trending lower in early trade, but U.S. Futures are higher in the premarket. Major economic reports on tap today include Jobless Claims at 8:30am, Leading Indicators at 10:00am, EIA Natural Gas report at 10:30am, and EIA Oil Report at 11:00am.

The SPDR Dow Jones Industrial Average ETF (DIA) rose $0.58 (+0.23%) in premarket trading Thursday. Year-to-date, DIA has gained 0.14%, versus a 1.20% 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 #1 of 79 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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