After the stock market plunges, a technical analysis snapshot

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December 5, 2018 12:52pm NYSE:DIA

Market technician Dave Chojnacki of StreetOne Technical Analysis

Equities opened weaker on Tuesday after big gains in the prior session.   There were still outstanding questions on the China Trade situation and AAPL was downgraded.   Techs began weaker and the Industrials that would be impacted by Trade also pushed lower. The selling was orderly until the SPX fell through its 200D-SMA and sell programs kicked in. 

The major indices began to fall rapidly and broke through every technical support level in their way. By the end of the session, the averages were down significantly. Rates moved lower and yield curves were flattening, contributing to the rout.   The 10YR moved below the 3 handle and ended at 2.92.

At the close on Tuesday, the DJIA was down 3.1%, the SPX fell 3.2%, and the NDX lost 3.7%.     Breadth was decidedly negative, 5 to 1, on heavy volume. ROC(10)’s declined in the session but remain in positive territory.   RSI’s moved lower, with the DJIA remaining the strongest at 47. The SPX ended at 46.2 and the NDX finished at 46.5. All three major indices remain with their MACD above signal.  The ARMS index ended the day at 2.76, an extremely bearish reading at the close.

After a big bounce last week, yesterday’s action took traders by surprise.  The DJIA and SPX fell through their 20, 50, and 200D-SMA’s in one session. The NDX fell through its 20D-SMA as it had not pulled back through its 50D and 200D-SMA’s.  All three major indices are back below their 50WK-SMA’s. On Monday, we saw the averages break through their down trend-lines and were setting up to rally further. Yesterday’s action changed all that and the indices will need to rebuild a base.   The DJIA closed at 25027, just off its low of 25008 in the session. It fell through its 200D-SMA of 25108, its 50D-SMA of 25521, and its 20D-SMA of 25108. The NDX closed at 6795 and traded as low as 6785. It remains below its 50D-SMA of 7062 and 200D-SMA of 7078.  On Tuesday, it fell below its 20D-SMA of 6842. The SPX ended at 2700, just above its low of 2697. It fell below its 20D-SMA of 2773, its 50D-SMA of 2767 and its 200D-SMA of 2762 in the session. The VIX spiked up 26.1%, to finish at 20.74. Near-term support for the NDX is at 6713 and 6609.   Near-term resistance is at 6842 and 6951. Near-term support for the SPX is at 2684 and 2650. Near-term resistance is at 2723 and 2762. Europe is significantly lower in early trade. US Markets are closed today in observance of President Bush.

The SPDR Dow Jones Industrial Average ETF Trust (DIA) was trading at $250.73 per share on Wednesday afternoon, down $8.00 (-3.09%). Year-to-date, DIA has gained 2.20%, versus a 1.68% 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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