Weak Energy Sector Limits Dow Jones Industrial Average’s Gains

Technical analyst Dave Chojnacki of Street One Financial recaps Tuesday’s dull market session and looks ahead to Wednesday’s action, with a special emphasis on the key technical levels for the major U.S. averages.

Equities opened higher on Wednesday, but there was little news to move the market at the open. There was some expectation that news from Washington may impact the market, but that generally wasn’t the case.

At 10:30am, we received the Energy report and oil prices fell on the news. This impacted the major indices, as they also took a hit. By early afternoon, equities were establishing a bottom and then got a ‘relief rally’ when former FBI Director Comey’s prepared testimony for today’s hearing was released.

The major averages then advanced into the close and pushed into positive territory. At the close, the Dow Jones Industrial Average (DJIA) gained 37.4 points, the S&P 500 (SPX) inched up 3.8 points, and the Nasdaq 100 (NDX) added 0.35%.


Breadth was negative, 1.1 to 1, on below average volume. ROC(10)’s were mixed, with the DJIA and SPX declining in the session and the NDX heading higher. All three major averages remain in positive territory.

RSI’s moved slightly higher, with the NDX ending at 73.8. The DJIA and SPX remain in the low to mid 60’s. All three major averages remain with their MACD above signal. The ARMS index ended the day at 1.09, just slightly bearish.

Yesterday was uneventful, as investors prepared for the UK election, Comey testimony, and ECB commentary from Mario Draghi today. The indices did manage small gains, but were continuing to consolidate the prior gains.

Near term technicals remain strong, as the major averages remain above their 20D-SMA’s: DJIA-20984, SPX-2405, NDX-5746. The indices also continue to remain below their Bollinger Band® tops.

As we noted earlier, the Energy sector took a big hit on Wednesday. The DBO (PowerShares Oil Fund) fell 3.7% to end at 7.97. Elsewhere, GLD (SPDR Gold) fell 0.52%, to 122.45, while the VIX fell 0.57% to 10.39.

Near term support for the NDX is at 5875 and 5850. Near term resistance is at 5900 and 5925. Near term support for the SPX is at 2425 and 2412. Near term resistance is at 2437 and 2450.

Europe is higher in early trade Thursday, and U.S. Futures are slightly higher in the premarket. Major economic reports on tap today include Jobless Claims at 8:30am and Natural Gas Inventories at 10:30am.

The SPDR Dow Jones Industrial Average ETF (NYSE:DIA) rose $0.18 (+0.09%) in premarket trading Thursday. Year-to-date, DIA has gained 7.19%, versus a 9.01% 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 #5 of 75 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.