Market technician Dave Chojnacki of Street One Financial wraps up an eventful trading week with a look at the technical breakdown of the major U.S. stock indexes, which have finally cracked amid pressure from geopolitical events.
Economic reports were not stellar on Thursday, but also not missing badly. Equities gapped down at the open as traders continued to focus on geopolitical issues, particularly North Korea.
With near term technicals weakening in the prior two sessions, the major averages tested new levels and broke down. We had the Nasdaq 100 and S&P 500 fall through their key 50D-SMA level of support. Once they were unable to hold these levels, this only accelerated the selling in the last hour.
By the final bell, all the major averages ended with significant losses. Once again the selling was broad and volume also picked up. At the close, the Dow Jones Industrial Average was off 0.93%, the SPX fell 1.4%, and the NDX lost 2.2%.
Breadth was decidedly negative, 6.5 to 1, on average volume. ROC(10)s fell across the board, with the DJIA the only index in positive territory. RSIs fell with the DJIA ending at 54.9. The NDX and SPX are now in the high 30’s to low 40’s. MACD’s for the NDX and SPX continue below signal. The DJIA remains slightly above signal. The ARMS index ended the day at 1.02, a nearly neutral reading.
It was the third straight loss for equities, and this time traders were rushing for the doors. Breakdown of some key technical levels surely had program trading executing sell orders. The NDX fell through its 20 and 50D-SMAs of 5900 and 5807, respectively. It traded as low as 5783 in the session. The next key support level is 5773.
The SPX also traded through its 20- and 50D-SMAs of 2470 and 2448, respectively. The SPX closed at 2438, near its low of the session. 2418 is the next key support level. The DJIA remains above its 20D-SMA of 21811.
The VIX spiked to 16.04, a 44.3% rise. Volatility has quickly moved back into the market.
Near-term support for the NDX is at 5773 and 5750. Near term resistance is at 5800 and 5807. Near term support for the SPX is at 2425 and 2418. Near term resistance is at and 2448-50 and 2462.
Europe is significantly lower in early trade Friday, while U.S. Futures are mixed in the pre-market. CPI-8:30am.
The SPDR Dow Jones Industrial Average ETF (NYSE:DIA) fell $0.22 (-0.10%) in pre-market trading Friday. Year-to-date, DIA has gained 11.94%, versus a 10.06% 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.