Dow, S&P Starting To Look Frothy

Technical analyst Dave Chojnacki recaps Monday’s mixed market action, which saw the S&P and Dow beginning to look overbought, but the Nasdaq showing bullish signs.

The market opened mixed yesterday with the DJIA and SPX opening to the upside, while the NDX somewhat lower. Equities remained in a fairly narrow range through the day, as volume was also slightly below average.

The DJIA continued its move to new highs on the back of Energy companies. After a pullback late morning, the averages moved slightly higher into the close. However, the SPX and NDX were unable to get into positive territory, ending with small losses. At the close, the DJIA tacked on 39.5 points, the SPX slipped 2.5 points, and the NDX fell 0.44%. Breadth was negative, 2 to 1, on slightly below average volume.

ROC(10)’s were mixed with the DJIA and SPX advancing, while the NDX declined. They all remained in positive territory. RSI’s moved slightly higher for the DJIA and SPX, with the DJIA at a very overbought reading of 85.9. The SPX continued slightly overbought at 73.7.

All three major indices remain with their MACD above signal. The ARMS index ended the day at 0.89, a slightly bullish reading. As noted earlier, the DJIA moved to new highs once again, on the backs of Energy stocks. XOM (Exxon Mobil) was up 2.2% and CVX (Chevron) gained 1.1% on the day.

The Dow continues to be the strongest of indices, and is fairly overbought. The DJIA also developed an ‘Evening star’ candlestick in the session, which is an indicator of a ‘topping’ formation. The NDX, which had gotten fairly close to its October highs on Friday, pulled back in the session. We see its 20D-SMA (4820) cross above its 50D-SMA (4818), a bullish signal. The SPX fell just 2.5 points from its closing new high on Friday. Both the SPX and DJIA are a little frothy at these levels.

The VIX was up 7.5% to 12.64, back above the 12.50 level. Near term support for the NDX is at 4850 and 4825. Near term resistance is at 4875 and 4909, 4911. Near term support for the SPX is at 2250 and 2225. Near term resistance is at 2262 and 2277.

Europe is up moderately in early trade this morning, while U.S. Futures are pointing higher in the pre-market. The only piece of major economic data we’ll see today is Export/Import Prices at 8:30am, while the Federal Reserve’s final meeting of the year — a two-day event — begins today.

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.