Dow Jones Industrial Average Bounce Looks Short-Lived

Market technician Dave Chojnacki of Street One Financial recaps Tuesday’s massive late-day rally and previews Wednesday’s action with an update on the important technical indicators for the major U.S. averages, which appear set for a down day today.

The market opened higher on Tuesday and then traded in a choppy manner on both sides of the flat line. Decent Auto sales were reported and pushed Auto makers higher. A rally near the end of the session pushed the major averages to decent gains on the day.

We saw particular strength in Industrials, Financials and Healthcare. The FANG stocks were bouncing off their recent weakness, attempting to make a bottom. The Dow Jones Industrial Average (DJIA) was the best gainer on the day. At the close, the DJIA gained 1.6%, the S&P 500 (SPX) added 1.2%, and the Nasdaq 100 (NDX) was up 1%. Breadth was decidedly positive, 3 to 1, on above average volume. ROC(10)’s advanced in the session, with all three major indices remaining in negative territory.

RSI’s inched higher, with the DJIA the strongest at 44. The NDX finished at 39.9 and the SPX at 41.6. All three major averages continue with their MACD below signal. The ARMS index ended the day at 0.61, a relatively strong reading.

We saw the DJIA take the lead yesterday, as Auto stocks helped to push it higher. It closed at 24033, which is still below its 2017 close of 24719. It did close just above its 150D-SMA of 24025. The DJIA is back above its 1yr. Trend-line of 23800 and back above its 10% correction level of 23955. It continues to hold above its 200D-SMA of 23436. The NDX closed at 6458, moving back above its 10% correction level of 6418. It continues below its 1yr. Trend-line of 6500. It closed just above its 150D-SMA of 6427.

The NDX continues well above its 200D-SMA of 6274. The SPX closed at 2614, just 2 points above its 1yr.Trend-line of 2612. It is back above its 200D-SMA of 2590. The SPX continues below its 150D-SMA of 2637. It continues below its 2017 close of 2673.

The VIX fell 10.6%, to push the VIX down to 21.10.

Near term support for the NDX is at 6427 and 6400. Near term resistance is at 6500 and 6550. Near term support for the SPX is at 2600 and 2590. Near term resistance is at 2625 and 2637.

Europe is trading moderately lower in early trade Wednesday, while U.S. Futures are significantly lower in the premarket. Major economic reports on tap today include ADP Employment Report at 8:15am, PMI Services at 8:45am, Factory Orders at 10:00am, ISM Non-Mfg Index at 10:00am, and the EIA Oil Report at 10:30am.

The SPDR Dow Jones Industrial Average (NYSE:DIA) fell $4.90 (-2.04%) in premarket trading Wednesday. Year-to-date, DIA has declined -2.92%, versus a -2.28% 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 #3 of 80 ETFs in the Large Cap Value ETFs category.