More Downside Ahead For Dow Jones Industrial Average?

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October 15, 2018 7:57am INDEXDJX:.DJI NYSE:DIA

Market technician Dave Chojnacki of StreetOne Technical Analysis kicks off the new trading week with a deep dive into the underlying technicals for the major U.S. averages.

After two big days to the downside equites were oversold and looking to bounce.   Sure enough, the major indices opened strong to the upside on Friday, despite no major economic reports or news.  Friday was purely a technical bounce and the selling may not be over.

The early gains were nearly given up midway in the session on Friday, but a strong finish broke the losing streak.  It was 6 straight losing sessions for the SPX before finishing positive on Friday. Big Techs were strong and lead to the NDX having the best session. All three major indices ended the day with significant gains.  For the week, the major averages registered significant losses: Dow Jones Industrial Average (DJIA) down 4.1%, SPX off 4% and NDX falling 3.2%. The 10YR inched up to 3.14% on Friday. The spike in rates and Trade issues are being held responsible for the recent pullback.

At the close on Friday, the DJIA was up 1.1%, the SPX added 1.4%, and the NDX gained 2.7%.   Breadth was slightly positive, 1.2 to 1, on above average volume. ROC(10)’s advanced for all three major indices, but they remained in negative territory.  RSI’s moved higher after being way over-sold. The NDX ended at 36.5, the strongest of the major indices. The SPX finished at 29.5 and the DJIA at 34.3. All three major indices remain with their MACD below signal.   The ARMS index ended the day at 0.75, a slightly bullish indication.

It was a bad week for equities and near and short term technicals remain weak.  The NDX and SPX finished the week above their 50% retrace levels. All three major indices fell below their 200D-SMA’s during the week, but Friday’s strong session brought them back above.  If we can hold the 200D for another couple sessions, perhaps the worst of the selling is over. The DJIA closed at 25339, above its 200D-SMA of 25102. It remains below its 50D-SMA of 25989.  It is below its 20WK-SMA of 25456.

The NDX ended at 7157, above its 200D-SMA of 7041. It continues below its 50D-SMA of 7469. It holds above its 50WK-SMA of 6927. The SPX closed at 2767, one point above its 200D-SMA of 2766.  It continues to hold its 50WK-SMA of 2743. It remains below its 50D-SMA of 2876. The VIX was up 14.6% to 21.31. For the week, it was up 43.9%.

Near term support for the NDX is at 7041 and 6908. Near term resistance is at 7250  and 7469. Near term support for the SPX is at 2766 and 2739. Near term resistance is at 2800 and 2812.

Europe is mixed in early trade Monday, and US Futures are lower premarket. Major economic reports on tap today include Retail Sales at 8:30am, Empire State Index at 8:30am, and Business Inventories at 10:00am.

The SPDR Dow Jones Industrial Average ETF (DIA) fell $0.54 (-0.21%) in premarket trading Monday. Year-to-date, DIA has gained 3.25%, versus a 3.82% 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 #4 of 82 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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