Dow Jones Industrial Average Bulls Won’t Be Denied Their Holiday Rally

Technical analyst Dave Chojnacki of Street One Financial recaps Tuesday’s major market rally and previews the final full trading day of the holiday-shortened week with an update of the important technical levels for the major U.S. indexes.

Positive overseas markets set the stage for equities in the US to open to the upside on Tuesday. Just after the open, we got better than expected numbers on Existing Home Sales, helping to propel the major indices to the upside.

It was the big Tech names which lead the way, sending the Nasdaq 100 (NDX) to new highs. The Dow Jones Industrial Average (DJIA) and S&P 500 (SPX) joined in the rally and also broke out to new highs.

The rally was widespread with small-caps (IWM) also making a new high. After 2 weeks of near-term weakness, equities broke out of the range. Low volume did not lend conviction to the move and may have been the reason for the breakout.

At the close yesterday, the DJIA moved up 0.69%, the SPX gained 0.65%, and the NDX added 1.1%. Breadth was decidedly positive, 2 to 1, on below average volume. ROC(10)’s advanced in the session, with all 3 major averages crossing back into positive territory. This was a boost to momentum.

RSI’s also rose, with the NDX the strongest at 68.5. The DJIA and SPX are now in the low to mid 60’s. MACD’s remain below signal for all three major indices. The ARMS index ended the day at 1.36, indicating some weakness at the close.

The major indices broke out to new highs Tuesday after a lethargic 2 weeks. It was a strong move except for the missing volume. The DJIA closed at a new high of 23590 and traded as high as 23617 in the session. It moved back above its 20D-SMA of 23444. Its upper Bollinger Band® provided the top at 23613.

The NDX closed at 6378 and traded as high as 6380. It remains comfortably above its 20D-SMA of 6268. The SPX hit the 2600 level for the first time, trading as high as 2601. It closed at 2599, holding above its 20D-SMA of 2580.

The VIX fell 8.5%, to finish with a 9 handle at 9.73.

Near term support for the NDX is at 6350 and 6300. Near term resistance is at 6400 and 6425. Near term support for the SPX is at 2580 and 2575. Near term resistance is at 2600, 2601, and 2612.

Europe is mixed in early trade Wednesday, while U.S. Futures are pointing higher in the premarket. With tomorrow’s Thanksgiving holiday on tap, we’ll see a slew of economic data reports packed into today’s session, including Durable Goods at 8:30am, Jobless Claims at 8:30am, Consumer Sentiment at 10:00am, and the EIA Petroleum Report at 10:30am.

The SPDR Dow Jones Industrial Average ETF (DIA) rose $0.32 (+0.14%) in premarket trading Wednesday. Year-to-date, DIA has gained 21.14%, versus a 17.39% 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 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.