Dow Jones Industrial Average Bounces Off Strong Support Once Again

Market technician Dave Chojnacki of Street One Financial kicks off the new trading week with a recap of last week’s action with an update of the important underlying technicals for the major U.S. stock averages.

The Market opened lower on Friday, as the Employment report was received with mixed reviews.   The Dow Jones Industrial Average (DJIA) and S&P 500 (SPX) were testing their strong support at the 200D-SMA level right near the open.

Word that Warren Buffett took a large position in Apple (AAPL) encouraged investors and increased their appetite for the stock. AAPL went on to new all-time highs in the session closing at 183.83. The major indices followed AAPL’s lead and rallied through the remainder of the session. The bounce off the 200D average, which has now occurred several times, suggests that it is a strong support level.

The major indices ended the day with significant gains.   At the close, the DJIA gained 1.3%, the SPX added 1.2%, and the Nasdaq 100 (NDX) was up 1.9%. Breadth was decidedly positive, 3 to 1, on below average volume.   ROC(10)’s advanced in the session, with the NDX crossing back into positive territory. The DJIA and SPX remain in negative territory.

RSI’s moved higher, with the NDX leading the way at 55.6. The DJIA is now at 49.2 and the SPX at 50.4. The SPX and DJIA remain with their MACD below signal. The NDX continues with its MACD above signal. The ARMS index ended the day at 0.63, a bullish reading. Friday’s strong session helped to salvage a poor performing week. The bounce off the 200D support level was encouraging, but the weak volume was not convincing.

For the week, the DJIA added 0.2%, the NDX was up 1.6%, and the SPX slipped 6 points. We continue in this trading range between the 200D averages and the 50% retrace level.   The 50% retrace level sits at : DJIA- 25074, SPX-2726, NDX-6760. The DJIA and SPX continue below their 50D-SMA’s of 24311 and 2681, respectively.   The NDX moved above its 50D of 6737. The VIX fell 7.1% on Friday to 14.77.

Near term support for the NDX is at 6737 and 6652. Near term resistance is at 6800 and 6833. Near term support for the SPX is at 2660 and 2615. Near term critical resistance is at 2681 and 2726.

Europe is mostly higher in early trade Monday, while U.S. Futures are moderately higher in the premarket. There are no major economic reports scheduled for today.

The SPDR Dow Jones Industrial Average ETF (DIA) rose $1.02 (+0.42%) in premarket trading Monday. Year-to-date, DIA has declined -1.96%, versus a -0.31% 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 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.