Dow Jones Industrial Average Bounces Back From Italy Worries

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May 31, 2018 8:54am INDEXDJX:.DJI NYSE:DIA

Market technician Dave Chojnacki of StreetOne Technical Analysis recaps Wednesday’s big bounce-back rally and previews Thursday’s action with an update of the underlying technicals for the major U.S. averages.


The market suffered a big loss on Tuesday on concern over Italy and their bond market.   On Wednesday, the market opened higher as if all fears from Europe were gone.

The GDP estimate came in as expected and the 10YR, while moving up, is at 2.84% below the 3 handle.  Equities continued to move higher through the morning hours and peaked late in the afternoon. Energy and Financials were two of the strong sectors on the day. Techs were not left out of the rally, as AMZN, MSFT, NFLX, and INTC closed at new all-time highs. There was some consolidation in the last hour, but all three major averages ended with significant gains.

At the close, the Dow Jones Industrial Average (DJIA) and S&P 500 (SPX) added 1.2%, and the Nasdaq 100 (NDX) gained 1.7%.  Breadth was decidedly positive, 4 to 1, on average volume. ROC(10)’s moved higher with the NDX and SPX crossing back into positive territory.   The DJIA remains in negative territory. RSI’s moved higher, with the NDX continuing to lead at 60.7. The DJIA is now at 51.6 and the SPX at 55.1.  The DJIA and SPX MACD’s crossed below signal, due to the extended recent sideways action. The NDX MACD continues above signal. The ARMS index ended the day at 0.57, a strong bullish reading.

After a long string of sideways action, the major indices spent the last 2 sessions negating each other.  The DJIA and SPX continue to remain below the 50% retrace levels of 25074 and 2726, respectively. The NDX continues above its 50% retrace level of 6760.  The DJIA finished the day on Wednesday at 24667, just above its 20D-SMA of 24604. It remains comfortably above its 50D-SMA of 24389. The NDX continues to be the strongest index near term.  It closed at 6976, above its 20D-SMA of 6881. We see some resistance near term at 7008.

The SPX closed at 2724, just 2 points below its 50% retrace level. It ended the day above its 20D-SMA of 2703.   The VIX was down 12.2%, finishing at 14.94. Near term support for the NDX is at 6900 and 6881. Near term resistance is at 7000 and 7008. Near term support for the SPX is at 2703 and 2672. Near term critical resistance is at 2726 and 2750.  

Europe is mixed in early trade Thursday, while U.S. Futures are mixed in the premarket. Major economic reports on tap include Jobless Claims at 8:30am, Personal Income at 8:30am, Chicago PMI at 9:45am, Pending Home Sales at 10:00am, EIA Natgas at 10:30am, and EIA Petro at 11:00am.

The SPDR Dow Jones Industrial Average ETF (DIA) rose $0.26 (+0.11%) in premarket trading Thursday. Year-to-date, DIA has gained 0.56%, versus a 2.56% 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 81 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 StreetOne Technical Analysis. In addition, he is Portfolio Manager for Sabretooth Advisors.

Dave develops 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.

Prior to joining StreetOne Technical Analysis, Dave designed and developed I/T Systems for the Insurance and Financial Industries.


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