S&P 500 Shows Technical Signs Of Topping

Technical analyst Dave Chojnacki recaps Tuesday’s mixed market action, which saw some early weakness followed by later buying, and updates the technical levels that investors and traders should focus on for the major indexes.

Tuesday Recap

Mixed economic news had the major indices weak in the early morning hours on Tuesday. We expected some additional near term weakness and consolidation, and we got that early on in the trading session.

Equities then turned around and steadily moved higher throughout the remainder of the session. Although volume dropped off, all three major averages ended the day near their highs of the day. The DJIA made a new closing high as all three major indices closed with small gains. At the close, the DJIA gained 35.5 points, the SPX added 7.5 points, and the NDX gained 10.5 points.

Technicals To Watch

Breadth was decidedly positive yesterday, 2.3 to 1, on below average volume. ROC(10)’s declined with the DJIA and SPX remaining in positive territory and the NDX in negative. This exemplifies the declining momentum we’ve been talking about as of late.

RSI’s inched higher, with the DJIA continuing to be the strongest at 75.7. The NDX remains the only major index with its MACD below signal. The ARMS index ended the day at 0.97, a neutral reading.

The DJIA continued its move higher establishing in a new closing high, but it failed to test the prior session’s intraday high of 19274, getting only as high as 19255. The DJIA and SPX both developed ‘Hanging Man‘ candlesticks in the session, a topping formation. The NDX developed a ‘Doji,’ which is a reversal of direction indicator.

Bias to the upside remains positive, but these signals may be indicating more consolidation before we move much higher. The SPX traded within one point of its recent high of 2213 and ended at 2212. Watch this level for further upside strength. The NDX continues to be the weakest of the big three, but moved above its near term 50% retracement level of 4766. NDX remains just below its 20D-SMA (4803) and its 50D-SMA(4817). The VIX fell 3.1% to 11.76.

Near term support for the NDX is at 4766 and 4750. Near term resistance is at 4803 and 4817. Near term support for the SPX is at 2200 and 2190. Near term resistance is at 2213 and 2225.

Quick Wednesday Preview

Europe is up moderately in early trade, while U.S. Futures are mixed in the premarket. In terms of economic data coming out today, we’ll see JOLTS Job Openings at 10:00am, Crude Inventories at 10:30am, and Consumer Credit at 3:00pm.

The SPDR S&P 500 ETF Trust (NYSE:SPY) was down slightly in premarket trading Wednesday, at $221.40. Year-to-date, the largest ETF tied to the benchmark S&P 500 index has gained 8.75%.

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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.