Market technician Dave Chojnacki of StreetOne Technical Analysis kicks off the new trading week with a deep dive into the underlying technicals for the major U.S. averages.
Employment numbers came in lower than expected on Friday, but revisions in prior months balanced the difference. The Unemployment rate at 3.7% was the lowest since 1969. Equities ignored the news and opened lower, as rates continue to rise and Bonds continue to fall. The 10YR has moved up to 3.23%.
The good news at the beginning of the week regarding the new trade deals, has been shadowed by rates. Techs and Chip stocks took it on the chin Friday and helped push the NDX to be the biggest loser. The major indices did come off their lows of the session, but the NDX still managed to close with a significant loss. The Dow Jones Industrial Average (Dow) and SPX finished with moderate losses on Friday. For the week, the Dow fared the best slipping only 11 points. The NDX was the big loser, dropping 2.9% for the week and the SPX fell 0.9%.
At the close on Friday, the Dow fell 0.68%, the SPX was down 0.55%, and the NDX gave up 1.2%. Breadth was decidedly negative, 2 to 1, on above average volume. ROC(10)’s declined, with all three major indices remaining into negative territory. RSI’s fell in the session for all three major indices. The Dow continues to be the strongest at 54.7. The NDX finished at 38.9 and the SPX closed at 44.5. The Dow MACD crossed below signal, joining the NDX and SPX. The ARMS ended the day at 0.82, a slightly bullish indication.
At the beginning of the week, the NDX hit a new record intraday high of 7700. On Friday it closed at 7399, down 3.9% from 7700. It broke its trend-line which was at 7500. A 5% pullback would put it at 7315. A Fibonacci 38% pullback takes the NDX to 7200. The NDX has been the weakest of the major indices as it sits below its 50D-SMA of 7479. Most of this loss was in the last 2 sessions. Near term there is more weakness, but we will watch the 7315 level for near term support. The Dow continues to be the strongest of the major indices closing at 26447. It continues to hold its 20D-SMA of 26395. Its 50D-SMA is now at 25948. Its MACD did cross below signal on Friday indicating we may see some more near term bearishness.
The SPX closed at 2885, below its 20D-SMA on Friday, which now sits at 2907. It continues to hold its 50D-SMA(2877). A 38% pullback puts it at 2796. The VIX ended at 14.82, up 22% for the week.
Near term support for the NDX is at 7315, 7308 and 7200. Near term resistance is at 7479 and 7540. Near term support for the SPX is at 2877 and 2823. Near term resistance is at 2900 and 2912.
Europe is lower in early trade Monday, and U.S. Futures are lower premarket.
The SPDR Dow Jones Industrial Average (NYSE:DIA) ETF (DIA) fell $0.51 (-0.19%) in premarket trading Monday. Year-to-date, DIA has gained 7.74%, versus a 8.29% 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 82 ETFs in the Large Cap Value ETFs category.