Market technician Dave Chojnacki of Street One Financial takes a closer look at Wednesday’s market reversal of fortunes for the major U.S. indexes from a technical perspective, as tech stocks suddenly recover and perhaps take the lead once again.
The Dow Jones Industrial Average and S&P 500 opened lower on Wednesday, while the Nasdaq 100 was moving higher. The DJIA and SPX continued the losing ways of the prior session, as it was a steady move downward throughout the day.
The NDX was moving higher, in contrast, bolstered by Tech, specifically, Healthcare and Biotech. By the final bell, the NDX was up significantly in the session, while the DJIA and SPX experienced small losses. At the close, the DJIA was down 57.1 points, the SPX inched down 1.4 points, and the NDX added 0.98%.
Breadth was decidedly negative, 2 to 1, on light volume. ROC(10)’s were mixed, with the NDX the only major index advancing, while remaining in negative territory. The DJIA and SPX declined, but continued in positive territory.
RSI’s moved lower for the DJIA and SPX, with the NDX moving higher. The DJIA remains the strongest near term, with an RSI of 63.9. The NDX and SPX are now in the mid 50’s. The SPX and the NDX remain with their MACD below signal. The DJIA MACD continues above signal. This continues near term caution for the SPX and NDX. The ARMS index ended the day at 1.27, a bearish reading.
The DJIA and SPX continued their pullback on Wednesday from the top of their Bollinger Bands®. It has been on light volume, however, so we aren’t waving the red flag just yet.
The DJIA continues well above its 20D-SMA of 21230. The SPX traded right down to its 20D-SMA of 2429 in the session and support remained intact. Its top Bollinger Band is now at 2452.
The NDX had a strong bounce yesterday, but met resistance right at its 20D-SMA of 5783. It closed a point below at 5782.
Oil continues to fall, with PowerShares Oil Fund (NYSE:DBO) at 7.55, just above its Jan. ’16 low of 6.55. The VIX fell 1% to finish at 10.75.
Near term support for the NDX is at 5775 and 5750. Near term resistance is at 5783 and 5800. Near term support for the SPX is at 2429, 2425 and 2412. Near term resistance is at 2450, 2452 and 2462.
Europe is lower in early trade on Thursday, while U.S. Futures are mixed in the premarket. Major economic reports today include Jobless Claims at 8:30am, FHFA House Price Index at 9:00am, Leading Indicators at 10:00am, and natural gas Report at 10:30am.
The SPDR Dow Jones Industrial Average (SI:SPDR) SPDR ETF (NYSE:DIA) rose $0.03 (+0.01%) in premarket trading Thursday. Year-to-date, DIA has gained 8.29%, versus a 8.69% 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 #5 of 76 ETFs in the Large Cap Value ETFs category.
Disclaimer: The content of this article is excerpted from a daily newsletter from Street One Financial. While ETF Daily News may edit the contents and add a relevant title to the piece, the author, David Chojnacki, does not endorse or recommend any issuer or security mentioned herein.