Dow Jones Industrial Average Posts Impressive Recovery, But Will It Last?

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April 5, 2018 7:57am INDEXDJX:.DJI NYSE:DIA

Market technician Dave Chojnacki of Street One Financial examines Wednesday’s midday turnaround and notes that the market’s technicals improved substantially as a result.

Trade fears hit the market once again at yesterday’s open, pushing the major averages down significantly at the start. The S&P 500 (SPX) moved back below its 200D-SMA in the first 15 minutes, and the Dow Jones Industrial Average (DJIA) was down 500 points.

Economic reports were mixed, but the ADP employment number was strong. The major averages quickly found a bottom and then crawled back throughout the session before ending positive on the day.   It was a big reversal and extremely positive for technicals. Expect more volatility till we develop a firm base to launch a new rally.

At the close, the DJIA was up 0.96%, the SPX gained 1.1%, and the Nasdaq 100 (NDX) added 1.5%. Breadth was decidedly positive, 2.2 to 1, on average volume.   ROC(10)’s advanced in the session, with all three major indices remaining in negative territory.

RSI’s inched higher, with the DJIA the strongest at 47.2. The NDX finished at 44 and the SPX at 45.7. All three major averages continue with their MACD below signal.   The ARMS index ended the day at 0.73, a positive reading.

Yesterday’s reversal was very positive for technicals, as all three major indices developed a large ‘Engulfing Bull’ candlestick in the session. Strong volume was missing. Tech stocks got a good bounce and helped to push the NDX to be the best gainer in the session.   The NDX closed at 6560, moving back above its 1yr.trend-line of 6500. It continues well above its 200D-SMA of 6279, but below its 50D-SMA of 6784.

The DJIA ended at 24264, remaining just below its 2017 close of 24719. It is above its 1yr. Trend-line(23800) and 10% correction(23955) levels. It is just below its 20D-SMA of 24463. The SPX closed at 2644, after trading below its 200D-SMA(2591) early in the session.   It continues just below its 2017 close of 2673 and 20D-SMA of 2689. The VIX fell 4.9% to 20.06.

Near term support for the NDX is at 6500 and 6450. Near term resistance is at 6600 and 6784. Near term support for the SPX is at 2600 and 2591. Near term resistance is at 2650 and 2689.

Europe is trading higher in early trade Thursday, and U.S. Futures are higher in the premarket. Major economic reports on tap today include International Trade at 8:30am, Jobless Claims at 8:30am, and the EIA Natural Gas report at 10:30am.

The SPDR Dow Jones Industrial Average ETF (DIA) rose $1.11 (+0.46%) in premarket trading Thursday. Year-to-date, DIA has declined -1.99%, versus a -1.24% 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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