Market technician Dave Chojnacki of Street One Financial examines Wednesday’s midday turnaround and notes that the market’s technicals improved substantially as a result.
Trade fears hit the market once again at yesterday’s open, pushing the major averages down significantly at the start. The S&P 500 (SPX) moved back below its 200D-SMA in the first 15 minutes, and the Dow Jones Industrial Average was down 500 points.
Economic reports were mixed, but the ADP employment number was strong. The major averages quickly found a bottom and then crawled back throughout the session before ending positive on the day. It was a big reversal and extremely positive for technicals. Expect more volatility till we develop a firm base to launch a new rally.
At the close, the Dow was up 0.96%, the SPX gained 1.1%, and the NASDAQ 100 (NDX) added 1.5%. Breadth was decidedly positive, 2.2 to 1, on average volume. ROC(10)’s advanced in the session, with all three major indices remaining in negative territory.
RSI’s inched higher, with the DOW the strongest at 47.2. The NDX finished at 44 and the SPX at 45.7. All three major averages continue with their MACD below signal. The ARMS index ended the day at 0.73, a positive reading.
Yesterday’s reversal was very positive for technicals, as all three major indices developed a large ‘Engulfing Bull’ candlestick in the session. Strong volume was missing. Tech stocks got a good bounce and helped to push the NDX to be the best gainer in the session. The NDX closed at 6560, moving back above its 1yr.trend-line of 6500. It continues well above its 200D-SMA of 6279, but below its 50D-SMA of 6784.
The Dow ended at 24264, remaining just below its 2017 close of 24719. It is above its 1yr. Trend-line(23800) and 10% correction(23955) levels. It is just below its 20D-SMA of 24463. The SPX closed at 2644, after trading below its 200D-SMA(2591) early in the session. It continues just below its 2017 close of 2673 and 20D-SMA of 2689. The VIX fell 4.9% to 20.06.
Near term support for the NDX is at 6500 and 6450. Near term resistance is at 6600 and 6784. Near term support for the SPX is at 2600 and 2591. Near term resistance is at 2650 and 2689.
Europe is trading higher in early trade Thursday, and US Futures are higher in the premarket. Major economic reports on tap today include International Trade at 8:30am, Jobless Claims at 8:30am, and the EIA Natural Gas report at 10:30am.
The SPDR Dow Jones Industrial Average ETF DIA rose $1.11 (+0.46%) in premarket trading Thursday. Year-to-date, DIA has declined -1.99%, versus a -1.24% 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 #3 of 80 ETFs in the Large Cap Value ETFs category.