Market Technician Dave Chojnacki of Street One Financial kicks off the new trading week with a recap of Friday’s action and looks ahead to the technical conditions that will likely influence the U.S. averages this week.
As expected, September’s Employment Report was impacted by the hurricanes. If you look inside the numbers, however, it was not a bad report. The major indices were a bit lethargic on Friday after several days of new record highs. Healthy consolidation is positive for a continued strong market.
The Nasdaq 100 was the only major average able to close with a small gain, and a new high. The Dow Jones Industrial Average (DJIA) and S&P 500 closed with minimal losses. Volume was the lowest of the week.
At the close, the DJIA slipped 1.7 points, the SPX inched down 2.7 points, and the NDX added 7.4 points. Breadth was negative, 1.8 to 1, on below average volume.
ROC(10’s) were mixed, with the SPX declining and the DJIA and NDX advancing. The DJIA leads all with an RSI of 79.4. The SPX is at 76 and the NDX at 65.5. The ARMS Index ended at 0.96, a nearly neutral reading.
For the week: the DJIA was up 1.6%, the SPX added 1.1%, and the NDX gained 1.4%. The VIX ended up 0.14 for the week to 9.65, despite the big equity gains.
Economic reports are light this week, so other factors will be taking center stage to push equities around.
Long term, the upside bias for the markets continues. All three major indices made new highs last week. The key averages continue well above their 200D-SMA’s: DJIA- 21097, SPX-2396, NDX-5578.
Short term, the major indices continue to keep the upside bias intact. Since the July low, the DJIA is up 7%, the SPX is up 5.8%, and the NDX up 8.6%. They major indices remain above key short term moving averages. Near term, the upside bias is strong, but the DJIA and SPX are becoming a bit overbought. Both have RSI’s in their upper 70’s. Near term critical support is now at: DJIA-22219, SPX-2488, NDX-5839. With the averages somewhat extended, we can see a near term pullback of 2.5%.
Europe is lower in early trade, while U.S. Futures are pointing higher in the premarket. Note that with today being Columbus Day, banks are closed, and there are no economic reports on tap for today.
The SPDR Dow Jones Industrial Average (SI:SPDR) ETF rose $0.25 (+0.11%) in premarket trading Monday. Year-to-date, DIA has gained 16.93%, versus a 14.85% 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 75 ETFs in the Large Cap Value ETFs category.