Market technician Dave Chojnacki of Street One Financial recaps Monday’s big market rally and looks ahead to Tuesday’s action with an update of the technical levels to watch for the major U.S. stock averages.
With no major economic reports to start off the week, investors were willing to buy equities in droves, since no major events with North Korea occurred over the weekend. Traders picked up where they left off on Friday, buying back the big Techs most of all.
The major averages got off to a good start, but then stayed mostly side-ways through the remainder of the session. Volume was fairly good for a summer Monday and breadth was good as well. The major averages ended the day with moderate to significant gains.
At the close, the Dow Jones Industrial Average (DJIA) was up 0.62%, the S&P 500 (SPX) gained 1%, and the Nasdaq 100 (NDX) added 1.3%. Breadth was decidedly positive, 3 to 1, on average volume.
ROC(10)’s gained across the board, with the NDX crossing back into positive territory. The SPX is the only major index remaining in negative territory. RSI’s also gained, with the DJIA remaining the strongest at 62. The NDX and SPX are now in the low to mid 50’s.
MACD’s remain below signal for all three major indices. The ARMS index ended the day at 1.15, a slightly bearish reading.
The major averages followed through on Friday’s bounce, with big Techs getting most of the love. The NDX, which moved back above its 50D-SMA on Friday, moved above its 20D-SMA of 5903 in yesterday’s session. It is now 100 points above its 50D-SMA of 5808. Critical short term support is now at 5597.
The SPX crossed above its 50D-SMA of 2448, but was unable to close above its 20D-SMA of 2470. The critical support for the SPX sits at 2405. The DJIA continues to remain above its 20D-SMA of 21840.
The iShares Russell 2000 (NYSE:IWM) (Russell 2000) was up 1.5%, bouncing off its 200D-SMA area. Meanwhile, the VIX fell 20.5% to 12.33, as the recent bout of volatility appears to be over.
Near term support for the NDX is at 5903, 5900, and 5875. Near term resistance is at 5916 and 5925. Near term support for the SPX is at 2448 and 2425. Near term resistance is at and 2470 and 2480.
Europe is higher in early trade on Tuesday, and U.S. Futures are pointing higher in the premarket. We’ll see a slew of major economic reports released today, including Retail Sales at 8:30am, Empire State Survey at 8:30am, Import/Export Prices at 8:30am, Business Inventories at 10:00am, and the Housing Index at 10:00am.
The SPDR Dow Jones Industrial Average (SI:SPDR) ETF rose $0.53 (+0.24%) in premarket trading Tuesday. Year-to-date, DIA has gained 12.64%, versus a 11.31% 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 #4 of 76 ETFs in the Large Cap Value ETFs category.