Dow Jones Industrial Average Drops For Sixth Straight Session

Market technician Dave Chojnacki of StreetOne Technical Analysis recaps Tuesday’s bearish session and looks ahead to Wednesday’s action with a deep dive into the underlying technicals for the major U.S. stock averages.

We got a mixed Housing Report on Tuesday, but investors were focused on $200B worth of tariffs on China. This spooked the market and equities gapped lower at the open. All three major indices were significantly lower in early trade, but the Dow Jones Industrial Average (DJIA) was getting hit the hardest.

Investors were worried that the tariffs would hit the big industrial giants the worst. A little after the first hour of trading, equities began to make a slow turn to the upside. The major averages continued to climb into the close, but were unable to get back in the green. The DJIA ended with a significant loss, while the Nasdaq 100 (NDX) and S&P 500 (SPX) closed with moderate losses.

At the close, the DJIA fell 1.1%, the SPX gave up 0.4%, and the NDX was down 0.32%. Breadth was negative, 1.3 to 1, on slightly above average volume. ROC(10)’s fell across the board, with the DJIA and SPX crossing into negative territory. The NDX remains in positive territory.

RSI’s fell in the session, with the NDX continuing to lead at 66.2. The DJIA fell to 44.9 and the SPX ended at 56. The DJIA and SPX MACD crossed below signal indicating the recent weakness. The NDX MACD remain above signal. The ARMS index ended the day at 0.99, a neutral reading.

The DJIA has been down for 6 straight sessions. It fell below its 50% retrace level this week. It closed at 24700 yesterday, below its 20D-SMA of 24924. The DJIA briefly traded below its 50D-SMA (24647) on Tuesday before closing above. While it was encouraging that the averages hit their lows early and then closed higher, the recent weakness in the DJIA warrants caution.

The NDX has been the strongest index recently, closing at 7228. It continues above its 20D-SMA of 7106. The NDX continues to display technical strength near and short term. The SPX ended at 2762, holding above its 20D-SMA of 2751. It continues well above its 50% retrace level of 2726. The VIX ended the day at 13.35, up 8.4%.

Near term support for the NDX is at 7200 and 7150. Near term resistance is at 7250 and 7291. Near term support for the SPX is at 2751 and 2725. Near term critical resistance is at 2788-89 and 2800.

Europe is slightly higher in early trade Wednesday, and U.S. Futures are pointing higher in the premarket. The only major economic report out today is Existing Home Sales at 10:00am.

The SPDR Dow Jones Industrial Average (NYSE:DIA) rose $1.09 (+0.44%) in premarket trading Wednesday. Year-to-date, DIA has gained 0.63%, versus a 3.65% 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 81 ETFs in the Large Cap Value ETFs category.